Option Greeks – Delta, Gamma, Vega, Theta & Rho.

Option gamma calculation formula

Option gamma calculation formula


Hi Peter,

thanks for sharing the sheets. Have a query here. This will assist in building a strategy.

. EOD Nifty is , Futures is . 5855 PUT is at . Your Basic page gives 79. Market has gone bullish and there is 69 days to expiry.

You mentioned by exploiting the difference between their traded price and the theoretical price of the option.

So how can this price difference(given above) be exploited? What should be the position for PUT.

Any input will certainly help.

Gamma of an Option (Definition, Formula) | Calculate Gamma

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Gamma Explained | The Options & Futures Guide

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AShortcut Option Pricing Method

Hi Arwen,

When you buy an option you pay the premium (option price) to the option seller so as the option seller you receive the premium at the time of trade.

With a short position, you want the price of the option to decrease, ideally to zero, at which point the option will be worthless. Once the option expires worthless, you, the option seller have benefited by retaining the premium received by the buyer of the option.

If the price of the option increases, you may end up buying the option back (to square of your short position) at a higher price than what you sold it for, which means you will make a loss in this situation.

Let me know if anything is still unclear.

Now take a look at figure 66 above? What are N(d6) and N(d7) doing as volatility rises? Is that intuitive or counter intuitive? Need a hint? Two words volatility drag.

Further, the delta of an option is useful for a shorter time period, while gamma helps a trader over a longer horizon as the underlying price changes. It is to be noted that the value of gamma approaches zero as the option goes either deeper into the money or deeper out of the money. The gamma of an option is the highest when the price is at the money. All long position have a positive gamma, while all the short options have negative gamma.

Hi Peter,

You answered Darryl s question on .

You said If you are short the position is still worthless, however, you make a profit - being the premium received for selling the option. I am confused. If the position is short, we can make profit. But why the position is still worthless? How to explain this?

Thank you!!

Note: The Gamma value is the same for calls as for puts. If you are long a call or a put, the gamma will be a positive number. If you are short a call or a put, the gamma will be a negative number.


This formula is work only for ATM of OTM money option. pl suggest how we can use this for ITM option and for specitic strike price

Greeks Against Spot Prices. Here is the short series for deep out of money call option and deep in and out of money put options.


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