Delta, Gamma, Vega, and Theta.
The factors that influence the price of an option are referred to as the "Greeks". These are a set of risk measures that indicate how exposed an option is to time-value decay, implied volatility and changes in the underlying price of the asset..
Greeks assist trades to estimate their risk when trading options. Understanding the Greeks gives traders an idea of the expected behaviour of an option. For example,
- How will the value of the option change as the stock price changes? (Delta)
- What is the probability of the option expiring in-the-money/out-of-the-money? (Delta)
- What effect will a change in the stock's volatility have on the option value? (Vega)
- How fast will the option lose value as it approaches expiration? (Theta)
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