Part 6 Institutional Trading

The Greeks: The Math Behind Options

Advanced traders use Greeks to understand risks.

Delta → Sensitivity of option price to stock price movement.

Gamma → Rate of change of Delta.

Theta → Time decay (how much option loses daily).

Vega → Sensitivity to volatility.

Rho → Sensitivity to interest rates.

Example:

A Call with Delta = 0.6 → If stock rises ₹10, option rises ₹6.

Theta = –5 → Option loses ₹5 daily as time passes.

Options vs Futures

Both are derivatives, but with a key difference:

Futures → Obligation to buy/sell at a price.

Options → Right, not obligation.

Example:

Futures are like booking a hotel room—you must pay whether you stay or not.

Options are like paying for a movie ticket—if you don’t watch, you lose only ticket price.