Option Greeks
When traders talk about “the Greeks,” they are referring to the different ways risk can be measured as it relates to a particular option or position. A different Greek letter (e.g., delta, gamma, vega) corresponds with each unique measurement. Together, these analytical tools enable traders to manage risk.
Of these, the delta is one of the most common. Often, you’ll see strategies or positions referred to as delta neutral. According to the theoretical pricing models, a delta neutral strategy has essentially no risk from market movement. In other words, the market could go up or down and the position will continue to perform as expected provided that certain predictable adjustments are made along the way.
