Why the Greeks Matter
Options prices don't move in a straight line with the stock. They're affected by direction, time, volatility, and the rate of change of all three. The Greeks quantify each of these forces - the difference between guessing and knowing why your option is up or down.
Delta - Directional Exposure
Delta measures how much an option's price changes per $1 move in the stock. A 0.50 delta call gains roughly $0.50 when the stock rises $1. Delta also approximates the probability of expiring in-the-money - a 0.30 delta call has roughly a 30% chance of finishing ITM.
Gamma - Rate of Change of Delta
Gamma tells you how fast delta changes. High gamma means your delta shifts rapidly with price moves. Gamma is highest for at-the-money options near expiration - which is why short-dated ATM options can be explosive. Long gamma profits from big moves; short gamma profits from stability.
Theta - Time Decay
Theta measures daily time decay. A theta of -0.05 means the option loses $5 per contract per day. Theta accelerates as expiration approaches - options lose more value in their final week than their first month. Sellers love theta; buyers fight it.
Vega - Volatility Sensitivity
Vega measures the price change per 1-point change in implied volatility. A vega of 0.10 means +$10 per contract if IV rises 1 point. Vega matters most around events - IV rises before earnings/FOMC and collapses after (IV crush). Even correct directional bets can lose money if IV crush wipes out gains.
Putting It Together
Every position is a combination of these forces. A long call is long delta, long gamma, short theta, and long vega. Understanding which Greek drives your P&L on any given day lets you make better decisions about entries, exits, and sizing. Trade Echo's DealerEdge uses gamma as its foundation - the same Greek that drives market maker hedging behavior.