Finance tool 01 · Options desk
| Side | Type | Qty | Strike | Price | Delta |
|---|
Black-Scholes
Each price comes from the Black-Scholes formula: the stock price, strike, time left, interest rate and volatility. Volatility matters most. Raise it and every option gets more expensive, because big moves become more likely and an option's loss is capped while its gain is not.
The Greeks
Delta is the dollar change for a $1 move in the stock. Gamma is how fast delta changes. Theta is the value lost each day to time decay. Vega is the change for one point of volatility. Rho is the change for one point of interest rates.
Expiry vs today
The white line is the payoff on the last day, when only the stock price matters. The teal line is what the position is worth right now, still carrying time value. As expiry approaches, the curve bends toward the white line: that drift is theta.