Options Academy
Long Call 102: The Greeks (Speed, Time & Volatility)
Understanding the Greeks is the difference between gambling and trading. Learn how Delta, Theta, and Vega control your profit and loss every single day.
Delta: Your Speedometer
Delta measures how much your call option's price moves for every $1 move in the stock.
• Deep ITM: Delta ~1.00 (Moves exactly like the stock).
• ATM: Delta ~0.50 (Moves half as fast as the stock).
• Deep OTM: Delta ~0.10 (Barely moves).
Book Insight: The "Up Delta" is often larger than the "Down Delta". This means your profits accelerate as you are right, and your losses decelerate as you are wrong.
Theta: The Wasting Asset
Theta is the daily "Rent" you pay to hold an option. It measures the time decay.
Options have an expiration date; stocks do not. Every day the stock stays still, your call loses value.
Crucially, Theta decay is non-linear. It accelerates as expiration approaches (the "Cliff" effect).
Theta Decay Curve (Non-Linear)
- value
Vega: The Volatility Wildcard
Vega measures sensitivity to Implied Volatility (IV).
The book argues that "Time Value Premium" is a misnomer—it is mostly Volatility Value.
If the market gets nervous, IV rises, and your call price increases even if the stock price hasn't moved. If IV crashes (e.g., after earnings), your call can lose value even if the stock goes up (The "IV Crush").
Key takeaways
- Delta is your price sensitivity (Speed).
- Theta is your time decay (Daily Rent).
- Vega is your volatility sensitivity (Uncertainty).
- Long calls are "Long Delta", "Short Theta", and "Long Vega".
Series
Long Call Masterclass
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