Delta & Gamma

What this unit covers

Learn Delta, how much an option's price moves per rupee of movement in the underlying, and Gamma, how much Delta itself changes, side by side.

By the end you will be able to

• Explain what Delta measures for an option's price right now.
• Explain what Gamma measures about Delta itself.
• Calculate a new Delta after a stock price move using Delta plus Gamma times the move.

How it starts: A Number That Does Not Sit Still

1. You are quoted a sensitivity of 0.50 on an option you hold.
2. The stock underneath it rises by 5 rupees before you check again.
3. Is that 0.50 still true, or has it already moved on you?

Words you will meet

Delta

How much an option's price is expected to move for a 1 rupee move in the underlying stock, right now.

Gamma

How much Delta itself changes for a 1 rupee move in the underlying stock.

In this module: Option Greeks

1. Delta & Gamma (this unit)
2. Theta & Vega