Explain what each option Greek measures
The idea
Each Greek measures sensitivity to one input. Delta, the response to the underlying, is N(d1) times the dividend discount factor for a call, between 0 and 1, and the call's delta less that discount factor for a put, between −1 and 0. Gamma is the rate at which delta changes, the same for a call and a put and highest near the money close to expiry. Vega, the response to volatility, is positive for both calls and puts. Theta, the response to the passage of time, is usually negative for a long option, so time decay favours the writer. Rho is positive for calls and negative for puts. The trap is thinking put vega is negative because puts and calls move in opposite directions with the underlying.
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