Some people get frightened by Options Greeks.
So I'm going to explain them with a 🚗 car analogy.
Let’s break down how options move — like driving.
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1️⃣ DELTA = SPEED (0 to 100 mph)
Buying stock? You’re already at 100 mph. $1 move in stock = $1 P&L per share. Full exposure.
Options? Delta varies.
Far OTM → Delta ~0 → crawling
ATM → Delta ~50 → cruising
Deep ITM → Delta ~100 → flooring it like stock
As price nears strike → Delta rises → you accelerate.
Cross into ITM → max speed. Option now acts like stock.
Delta tells you: “How fast am I going with the market?”
2️⃣ GAMMA = ACCELERATION
Gamma measures how fast your Delta (speed) changes.
High Gamma near expiry/ATM = pedal to the metal. Tiny move → Delta jumps → speed surges.
Deep ITM/OTM = low Gamma → smooth ride, speed barely changes.
Gamma = “How quickly do I pick up speed?”
3️⃣ THETA = FUEL BURN
Theta is time decay. Every day you hold, value leaks — like gas burning.
Long options? Negative Theta → you’re bleeding fuel.
You can't have acceleration (GAMMA) without burning some fuel (THETA) they go hand in hand.
Theta: “How much does sitting still cost me?”
4️⃣ VEGA = SENSITIVITY TO EXPECTED MOVES
First: Implied Volatility (IV) = market’s guess at future stock moves.
High IV → options are worth more (fat premiums).
Think of IV as fuel unit price. Same “horsepower” (Gamma) can cost $1/gal on a boring utility… or $10/gal on a meme tech stock.
Low vol stock is like a tractor.
High vol stock is like a rocket.
Tractor stock (low IV) → cheap fuel → low Theta bleed
Rocket stock (high IV) → rocket fuel → brutal Theta bleed
Market charges you for expected chaos. More expected movement = pricier premium = faster decay.
What if the tractor suddenly sprouts wings?
🚜→🚀
Your option becomes worth a lot more money, but the cost of running the engine (THETA) also goes up.
For example when MicroStrategy started buying BTC in 2020
Was: sleepy software → low IV, cheap fuel.
Became: Bitcoin treasury → vol exploded → fuel price mooned.
Options repriced - VEGA PNL
IV jumps 1% → long vega makes $$ (options fatter).
IV crashes → vega bleed.
Vega asks: “How much do I gain/lose if the market re-prices the chaos?”
Once the market reprices it expectations (VEGA PNL) you can cash it in and sell the options.
You don't have to wait and burn the more expensive fuel. That's your call.
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