Time Decay in Options Trading

Day 15 with Fincubs: Understanding Option Greeks When trading options, it’s not just about strike price and expiry — the real game lies in the Option Greeks. These are tools that measure how different factors affect option prices, helping traders manage risk effectively. Let’s decode them with simple examples 🔹 Delta (Δ): Measures how much the option price changes if the stock moves ₹1. Example: If a call option has a delta of 0.6 and the stock rises by ₹10, the option will rise by ₹6. 🔹 Gamma (Γ): Shows how much Delta changes if the stock price moves. Example: If Gamma = 0.1, and Delta was 0.6, then after a ₹1 stock rise, Delta becomes 0.7. 🔹 Theta (Θ): The loss in option value due to time decay each day. Example: If Theta = -2, the option loses ₹2 in value per day as expiry approaches. 🔹 Vega (ν): Sensitivity of option price to changes in volatility. Example: If Vega = 0.5, and implied volatility rises by 2%, the option price will increase by ₹1. 🔹 Rho (ρ): Impact of interest rate changes on option price. Example: If Rho = 0.2, and interest rates increase by 1%, the option value rises by ₹0.2. In short: Option Greeks act as a compass for traders guiding them through price moves, volatility shifts, and time decay. Mastering them is key to professional options trading. #OptionsTrading #FinanceLearning #StockMarket #Fincubs #Day14