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lostsomuchmoney t1_jac1djl wrote

Reply to comment by Youngerdiogenes in and I wouldn't change this system for the world. by moonyou22

I need help with delta and gamma that shit is way too confusing. I got vega theta and rho down but those were the easier ones

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CodeMonkey1 t1_jae5ooy wrote

Delta is how much the option price will change relative to the stock price changes, and gamma is how much the delta will change as the stock price changes.

Imagine a stock is $100 per share. You buy a call option for $1.00 with a delta of 0.10. If the stock goes to $101, your option is worth $1.10.

At the same time, as the underlying price changes, the delta itself will change. So imagining the above option has a gamma of 0.01. After the underlying moves to $101, the option delta is now 0.11. So if the price moves up again to $102, the option is now worth $1.21 and the new delta would be 0.12.

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