Rho measures how much an option’s price changes when interest rates rise by 1%. Call…
Option Greeks Comparison
| Greek | Meaning | Impact on Option Price | Behaviour | Best Usage | Example (Nifty/Bank Nifty) |
| Delta (Δ) | Measures how much an option’s price changes with a 1-point move in Nifty/Bank Nifty. | Higher Delta = Greater price movement with the index. | ITM options have high Delta (~1), ATM moderate (~0.50), OTM low (~0.10-0.30). | Used for directional trades to predict price changes. | Nifty 22,000 Call (Δ = 0.60): If Nifty rises 10 points, option gains ₹6. |
| Gamma (Γ) | Measures how much Delta changes when Nifty/Bank Nifty moves 1 point. | High Gamma = Faster Delta change, sharper price swings. | ATM options have the highest Gamma, ITM and OTM lower. | Important for short-term traders, as small moves impact option prices. | Bank Nifty 47,000 Put (Γ = 0.05): If Bank Nifty drops 10 points, Delta shifts from -0.50 to -0.45, making the put option gain value faster. |
| Theta (Θ) | Measures how much an option loses value daily due to time decay. | Higher Theta = Faster value loss near expiry. | ATM options lose value the fastest, OTM and ITM slower. | Key for option sellers, as time decay works in their favour, while buyers lose value. | Nifty Weekly Call (Θ = -5): If Nifty is unchanged, the option price drops ₹5 overnight due to Theta decay. |
| Vega (ν) | Measures how much an option’s price changes with a 1% change in implied volatility (IV). | High Vega = More impact from volatility shifts. | ATM and long-term options have higher Vega, ITM and OTM less. | Useful for trading around major events like RBI policy, earnings, or global news. | Bank Nifty 47,000 Call (Vega = 10): If IV rises from 20% to 21%, the option price gains ₹10. |
| Rho (ρ) | Measures how much an option’s price changes with a 1% interest rate change. | Higher Rho = Calls gain value, puts lose. | Affects long-term options more, minimal for short-term. | Used for long-term strategies involving rate changes. | Nifty 24,000 Call (Rho = 15): If RBI raises rates by 1%, the option gains ₹15. |