Option Greeks
The price of an option is affected by many factors. It’s important for traders to understand the factors that influence option prices, including the "Greeks" — a set of risk measures that indicate movements in the price of an underlying asset, the sensitivity of an option to time decay, and changes in implied volatility.

Here are four primary Greeks — Delta, Gamma, Vega and Theta — that you should know before placing an option.

 

Delta: Rate of Change of Underlying 

An option’s delta measures how much an option’s price is expected to change based on a $1 increase in the price of the underlying asset.

 

The value of delta is between −1 and 1. 

Call options: a positive delta between 0 and 1.

Put options: a negative delta between −1 and 0.

 

Example

In the event that the price of the underlying asset increases by $1:

 

Delta = 0.3

The price of the option is expected to increase by $0.30.

 

Delta= −0.2

The price of the option is expected to decrease by $0.20.

 

Gamma: Delta Accelerator  

Gamma is a measure of how much the Delta is expected to change when the price of the underlying asset rises by $1. The higher the Gamma, the more the option Delta will change, which means the greater the change in the option price.

 

Example

In the event that the price of the underlying asset increases by $1:

 

Delta = 0.3

Gamma = 0.1

Delta will increase from 0.3 to 0.4, which means that the price of the option is expected to increase by $0.30 to $0.40.

 

Theta: Time Decay

Theta measures the expected change in the value of an option over time. Simply put, it indicates how much value the option is expected to lose each day as it approaches expiration. 

 

Theta is always negative for call and put option buyers, as the closer the option is to expiring, the less value the contract has. In addition, the higher the negative Theta, the greater the loss in value of the option is expected to be the next day.

 

Example

Theta= −1.5

All other factors being equal, the option is expected to lose $1.50 in value the next day.

 

Vega: Volatility Sensitivity 

Vega measures how much an option’s price will change for a 1% change in the implied volatility of the underlying asset. 

 

Example

Vega = 12

It’s expected that a 1% increase in implied volatility will cause the option price to increase by $12. If the implied volatility decreases by 1%, it will cause the option price to drop by $12.

 

Implied Volatility (IV): Future Volatility of Underlying Price 

Although IV isn’t a Greek, it’s closely related. Implied volatility can predict possible movements in the price of the underlying asset. Investors use this indicator to estimate future volatility of an underlying price, based on certain predictive factors.

 

All other factors being equal, the higher the implied volatility of the option, the greater the possibility of the underlying asset's future volatility. As market hedging and investment demand increase, option prices rise accordingly. In this case, the buyer of the option needs to pay more to obtain the right to hold the option, and the seller of the option can get more premiums. If the implied volatility of the option is lower, then vice versa.

 

Where can I see the Greeks on Bybit?

Option Chain

You can see the Delta column on the Option Chain page. This column shows the Delta of each option. The left column is for call options, and the right column is for put options.

 

Order Zone

In the order zone, you can see the Greeks of the option you want to buy or sell, including Delta, Gamma, Vega and Theta.