Guide 2 · Intermediate

The Greeks & expiry day

Four numbers tell you how an option's price will react to the index, to time and to fear.

Why the Greeks matter

An option's premium moves for three reasons: the index moves, time passes, and the market's expectation of future movement (implied volatility) changes. The Greeks put a number on each. Every option chain in SWOT TRADER shows them, and the order ticket converts them into rupees per lot.

Delta: sensitivity to the index

Delta is roughly how much the premium moves for a 1-point move in the index. Calls have delta between 0 and 1; puts between 0 and −1.

ATM options have delta near ±0.5.
Deep ITM options approach ±1 and move almost point for point with the index.
Far OTM options have delta near 0 and barely react.

In rupeesA NIFTY 24,000 CE with delta 0.50: if NIFTY rises 40 points, the premium rises about 0.50 × 40 = ₹20. On one lot of 65 that is about ₹1,300. Delta is also a rough guide to the probability that the option finishes in the money.

Gamma: how fast delta changes

Gamma measures how much delta changes when the index moves 1 point. It is highest for ATM options and grows sharply as expiry approaches. High gamma means your position's behaviour changes quickly: an ATM option with delta 0.5 can become delta 0.9 after a sharp rally, or 0.1 after a sharp fall.

Key idea. Gamma is why expiry-day options can double or halve in minutes. Buyers love gamma when they are right; sellers fear it because their losses accelerate.

Theta: the cost of waiting

Theta is how much premium the option loses as time passes, if nothing else changes. It is the time value melting away. Buyers pay theta; sellers collect it.

Theta is not linear. It is gentle weeks before expiry and fierce in the final hours, because all the remaining time value must reach zero by 15:30 on expiry day.

Worked exampleOn expiry morning an ATM NIFTY call might cost ₹110 with about ₹110 of time value. If NIFTY goes nowhere, that premium falls towards zero by the close: over ₹1,000 an hour per lot in the afternoon. SWOT TRADER's ticket shows this as "Theta / hour".

Vega, implied volatility and India VIX

Implied volatility (IV) is the size of move the option price is "expecting". When fear rises, IV rises and every option becomes more expensive. Vega is how much the premium changes for a 1-point change in IV.

India VIX is computed by NSE from NIFTY option prices and is the market's fear gauge. A rising VIX lifts premiums even if NIFTY stands still; a falling VIX shrinks them.

IV crush. Before a known event (a policy decision, an election result) IV often climbs. Once the news is out, IV falls fast. Buyers who were right about direction can still lose money because the drop in IV outweighed the move.

What makes expiry day different

Time value races to zero. Options that are out of the money at 15:30 settle at ₹0.
Gamma peaks. Small index moves flip options from worthless to valuable and back.
Settlement uses the index's closing value. In-the-money options are cash-settled at the difference between the closing index value and the strike.
Sellers post more margin. SEBI's rules add an extra 2% extreme-loss margin on short options on expiry day.
OI walls get tested. Large open interest at round strikes can act as support or resistance until it breaks, and the break can be sharp as writers cover.

Expiry-day rules of thumb

Prefer ATM or slightly ITM strikes if you buy. Far OTM "lottery tickets" usually expire at zero.
Decide your exit before entry: a stop at an index level and a target at the next level.
Do not hold an out-of-the-money option into the last 15 minutes hoping for a miracle.
Size small. A position that is fine on Monday can swing three times as much on expiry afternoon.
Respect news. Big headlines spike IV and gamma together.

Practise it. Run the four experiments in SWOT TRADER's What-if simulator (Gamma, Theta, Vega, News straddle), then play a Pro day: the final hour, when gamma rules.

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