1. Why Option Greeks Determine 100% of Your Option PnL
Many beginners complain: “Nifty went up 50 points, but my Call option premium did not move!” The explanation lies in Option Greeks. Greeks measure the sensitivity of an option’s price to changes in underlying price, time passage, and market volatility.
2. The 4 Essential Option Greeks
1. Delta (Δ) – Price Sensitivity
Measures how much the option premium will change for every 1-point move in the underlying index.
- Deep ITM Delta ≈ 0.80 to 0.90 (moves almost 1-to-1 with stock futures).
- ATM Delta ≈ 0.50 (if Nifty moves 100 points, ATM option gains 50 points).
- Far OTM Delta ≈ 0.10 to 0.20 (requires massive index moves to gain value).
2. Theta (Θ) – The Silent Enemy (Time Decay)
Represents the daily loss of option premium caused strictly by the passage of time, holding all other variables constant. Theta decay is non-linear—it accelerates exponentially in the final 48 hours before weekly expiry.
3. Gamma (Γ) – The Rate of Delta Acceleration
Measures the speed at which Delta changes. Gamma is highest in ATM options on expiry afternoons. High Gamma is what causes ₹20 options to explode to ₹150 in 15 minutes during late-session trend breakouts.
4. Vega (ν) – Sensitivity to India VIX (Volatility)
Measures premium change for a 1% change in Implied Volatility (IV). Buying options when India VIX is low (10-12) and selling when VIX spikes (18-25) provides an immense statistical tailwind.
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