How to Calculate the Greeks on a Call Option
This article will show the reader how to calculate the different "greeks" of an option contract. These are important to understanding how the value of an option will change as the value of the underlying stock moves.
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Instructions
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The most common greek in an option contract is delta. Delta is the rate of change in the price of an option divided by the change in the underlying stock price. To calculate, take the hourly (or a smaller time frame--the shorter the time measure, the more accurate the calculation) call option price at a given strike and the corresponding underlying stock price. Calculate the periodic change between the option prices and the stock prices. Delta is simply the option price change over the stock price change.
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To calculate gamma, take the rate of change of delta over the periodic measures. Then, divide this number by the rate of change of the stock's price. In calculus, this is the second derivative of the rate of change of the option price over the stock price.
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Theta, the change
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