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Greek terms and their meaning

  1. debono

    14,927 posts.
    In light of some of the questions myself and others have been asking I thought I would post Greek terms and their meanings.

    Delta: the degree to which an option price will move given a small change in the underlying stock price. For example, an option with a delta of 0.5 will move half a cent for every full cent movement in the underlying stock.
    Gamma: It measures how fast the delta changes for small changes in the underlying stock price. ie the delta of the delta.
    Vega: The change in option price given a one percentage point change in volatility.
    Theta: The change in option price given a one day decrease in time to expiration. Basically a measure of time decay.
    Rho: The change in option price given a one percentage point change in the risk-free interest rate.

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