Option Greeks Explained for Beginners

Master your understanding of the Option Greeks with helpful examples, visualizations, and logical explanations!

Master your understanding of the Option Greeks with helpful examples, visualizations, and logical explanations!

The option greeks are critical to learn as a beginner options trader because the greeks tell you the risks your option positions are exposed to.

Option prices, and therefore, your profits and losses, change with the stock price, expected volatility, and passage of time.

The four primary option greeks are delta, gamma, theta and vega.

Delta estimates how an option's price changes relative to a $1 change in the stock price.

Gamma estimates how an option's delta changes relative to a $1 change in the stock price.

Theta estimates how an option's price will decay with the passing of each day, assuming the stock price and implied volatility remain constant.

Vega estimates how an option's price will change relative to a 1% shift in implied volatility or expected stock price fluctuations.

The greeks can be viewed from the perspective of an individual option or an entire complex option position (position greeks).

In this video, I'll explain the option greeks in detail, including helpful examples and data visualizations to help you deepen your understanding of these risk measurements.

0:00 Intro
0:15 Delta: Option Price vs. Stock Price
2:35 Gamma: Option Delta vs. Stock Price
5:34 Another Way to Think About Delta & Gamma
7:07 Theta: Option Price Decay
8:13 Vega: Option Price vs. Expected Stock Volatility
10:46 Individual Option Greeks vs. Position Greeks
13:43 Theta & Vega ONLY Impact Part of an Option's Price

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Disclaimer: Nothing contained in our content constitutes a solicitation, recommendation, promotion, or endorsement of any particular security, other investment product, transaction, or investment. Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involve substantial risk of loss and are not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. Past performance is not necessarily indicative of future results. I am not a financial advisor. The ideas presented in this video are for entertainment purposes only. You (and only you) are responsible for the financial decisions that you make.

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[DonovanBrown]

This is the best explanation of greeks I have seen yet. Very well done. Thanks for the information.

[irynalysa-stuckert]

The best, clearest and simplest explanation of technical concepts. Super awesome and thank you!!

[satinderbank]

Great Video as always - This is the Video to "PIN"/bookmark to quickly refer to when you need to understand any Greek. Thanks for creating a cheatsheet version of a video explaining Greeks.

[Haakonogkraaka]

This is by far the best channel on options on youtube. Thank you for making these videos!

[azenithtorres]

I am trying to learn options and found this! You are an absolute great teacher!! Thank you so much. Looking forward to more videos from you.

[jeremyjohnson]

Another fabulous video, thanks Chris!! I've generally used Delta as a way to gauge probabilities, selling spreads with a Delta of +/- 0.25. But with the recent two week bull run in stocks, the Deltas in my credit spreads have substantially increased causing significant losses.

[rohanmahajan]

goated video, when i was younger i always had trouble understanding this. this makes it so simple.

[Lindalouise]

Thank you for a very clear explanation of the Greeks.


.

[aciodeckio]

The best to explain Greeks from all the other vids I saw

[davethinkingsystems]

That was so clear. No BS just simple easy to understand facts. Thanks mate.

[tolik]

Another great video Chris. So far, could not find anyone explaining options better. Thank you.

[LightSaber]

One of the best explanations out there

[quarterfriedwithdirtyrice]

Thanks for that very clear and informative video. Love your work.

[FlamertheGamer]

What a well presented video, so easy to understand and a lovely smile

[MBz]

Thanks for the information. Great job.

[dex]

Brilliant 👍 I'll be signing up for sure to driven-data

[Funkeneh]

I love your videos. Whenever I have options questions I come here first to see if you have already done a video on that topic. With that said, if you take suggestions, I would love to see a video explainers on the topic of a gamma squeeze.

[raghbirsinghnahar]

Chris!!! Thank you for making such Informative Videos.

[scotthenderson]

As always very well enplaned and I understand them it unfortunately its still Greek to me and still can't get a long call to work out

[moesadr]

Can they be used to filter and find good options to trade? Anyone knows any tools or guide lines on how to use Options Greeks for entering a trade either long or short? Kind of what values to look for in each or all of them to enter or exit a trade?