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Learn the concepts behind TN Terminal: Greeks, dealer positioning, options flow, and the market mechanics that can influence price.
Open any guide below for the full explanation, practical interpretation, and the main takeaway to remember.
GreeksDeltaGamma+The Options Greeks: A Complete Guide for Traders
A practical map of Delta, Gamma, Vega, Theta, Vanna, Charm, and Vomma — what each Greek measures and how they connect.
15 min readOpen guide
01
The core Greeks
Delta measures how much an option price is expected to change for a one-unit move in the underlying. Gamma measures how quickly Delta changes as spot moves. Vega measures sensitivity to implied volatility, while Theta measures the effect of time passing. Together they describe the main directional, convexity, volatility, and time risks inside an option position.
02
Second-order Greeks
Vanna links spot and volatility by measuring how Delta changes when implied volatility changes (equivalently, how Vega changes as spot moves). Charm measures how Delta changes as time passes. Vomma, also called Volga, measures how Vega changes when implied volatility changes. These exposures matter because dealer hedges can change even when the underlying has barely moved.
03
How traders should use them
Greeks are risk measurements, not standalone buy or sell signals. Read them together with strike concentration, open interest, time to expiration, implied-volatility regime, liquidity, and the likely side of dealer inventory. The same Gamma or Vanna number can produce very different market behavior in a different positioning regime.
Key takeaway
Think of the Greeks as a live risk map: Delta describes direction, Gamma describes how direction changes, Vega describes volatility risk, Theta describes time, and the second-order Greeks describe how those risks interact.
DeltaGreeksDealer positioning+Delta: The Line of Fire and How It Drives Market Flow
Understand Delta, how it measures directional exposure, and why changing Delta can create hedging flow.
8 min readOpen guide
01
What Delta measures
Delta is the first derivative of an option's value with respect to the underlying price. A call normally has Delta between 0 and 1, while a put normally has Delta between -1 and 0 when signed convention is used. A 0.50 call Delta means the option is currently expected to gain roughly 0.50 for a one-unit rise in the underlying, before accounting for changes in the other inputs.
02
Why dealers hedge Delta
An options market maker can accumulate directional exposure while filling customer orders. To reduce that exposure, the dealer can trade shares, futures, or another correlated instrument. When Gamma, volatility, or time changes the option Delta, the hedge may need to be rebalanced. That rebalancing is one reason options positioning can translate into underlying-market flow.
03
Reading Delta correctly
Higher absolute Delta generally means the option behaves more like the underlying, while very low absolute Delta is less directionally sensitive. Delta is sometimes used as a rough probability proxy, but it is not a literal probability of expiring in the money. It is model-dependent and changes continuously with spot, volatility, rates, dividends, and time.
Key takeaway
Delta tells you the current directional exposure. Gamma, volatility, and time tell you how quickly that exposure may force the hedge to change.
GammaGEXDealer positioning+Gamma Exposure Explained: The Market's Shock Absorber
Learn how Gamma and aggregate GEX can influence hedging behavior, volatility, and the way price reacts around important strikes.
12 min readOpen guide
01
Gamma versus GEX
Gamma measures the rate of change of Delta as the underlying moves. Gamma Exposure, or GEX, is an attempt to aggregate Gamma across an options chain using position size and contract specifications. Different platforms can use different formulas and dealer-sign assumptions, so compare methodology before comparing absolute GEX numbers.
02
Positive and negative Gamma regimes
If dealers are net long Gamma, a common hedging pattern is to sell some underlying as price rises and buy some as price falls, which can dampen movement. If dealers are net short Gamma, hedge adjustments can instead move in the same direction as price and may amplify intraday movement. This is a framework, not a guarantee, because the true dealer inventory is not fully observable.
03
Important levels and Gamma flips
Large strike concentrations can become important when substantial Gamma and open interest sit near spot, especially into expiration. A Gamma-flip level is an estimate of where aggregate signed Gamma changes sign. Treat it as a regime reference rather than exact support or resistance, and confirm it with price action, liquidity, volatility, and the current expiration mix.
Key takeaway
GEX is most useful as a volatility-and-hedging regime tool: it helps frame whether dealer rebalancing is more likely to resist a move or reinforce it.
VegaGreeks+Vega: The Breath of the Market and Volatility Sensitivity
How Vega measures sensitivity to implied volatility and why volatility repricing can dominate an option even when spot barely moves.
7 min readOpen guide
01
What Vega measures
Vega estimates how much an option's value changes for a one-percentage-point change in implied volatility, all else equal. Long options are generally long Vega, so rising implied volatility helps their value; short options are generally short Vega, so falling implied volatility helps them. Vega is usually larger for options with more time remaining and is often concentrated around strikes near the money.
02
Volatility is a market price
Implied volatility is not simply a forecast of realized volatility. It is the volatility level embedded in option prices and reflects supply, demand, event risk, skew, and risk premia. Around earnings, macro releases, or other known events, implied volatility can rise before the event and collapse afterward even if the underlying moves.
03
Vega in a trading framework
Before trading an option, separate the directional thesis from the volatility thesis. A trader can be correct on direction and still lose if implied volatility falls enough. Read Vega alongside Delta, Theta, term structure, skew, and the catalyst calendar so you know which risk is actually driving the position.
Key takeaway
Spot direction is only one input. Vega tells you how much of the position is really a bet on the market's price of volatility.
ThetaGreeks+Theta Decay: The Silent Tax on Every Option
Understand how time decay works, why it is nonlinear, and why the trade-off between Theta and Gamma becomes critical near expiration.
7 min readOpen guide
01
What Theta measures
Theta measures the change in an option's theoretical value as time passes, assuming the other pricing inputs stay constant. Long vanilla options commonly have negative Theta because the time available for a favorable move is shrinking. Short options commonly collect that decay, but they take on the corresponding convexity and volatility risks.
02
Decay is not linear
Time value does not disappear at a constant rate. The decay profile depends on moneyness, implied volatility, and time to expiration, and it can accelerate as expiry approaches. Near expiration, a small amount of remaining time can coexist with very high Gamma, so a position can lose time value rapidly while also becoming extremely sensitive to spot movement.
03
The Theta-Gamma trade-off
Collecting Theta is not free yield. Short-option positions earn time decay in exchange for taking nonlinear risk when price or volatility moves sharply. Long-option positions pay Theta to own convexity. The useful question is therefore not whether Theta is good or bad, but whether the decay being paid or collected is attractive relative to the Gamma and Vega exposure taken.
Key takeaway
Theta is the cost of keeping optionality alive. Always evaluate it together with the Gamma and Vega you receive or sell in exchange.
VannaVEXDealer positioning+Vanna Exposure: The Vol-Spot Feedback Loop
A practical guide to Vanna, the connection between spot and implied volatility, and why volatility changes can trigger Delta hedging.
12 min readOpen guide
01
What Vanna measures
Vanna is a cross-Greek. It can be expressed as the change in Delta for a change in implied volatility, or equivalently as the change in Vega for a change in spot. That relationship matters because an option book's directional exposure can change when volatility moves even if the underlying price is nearly unchanged.
02
How the feedback loop appears
Equity-index markets often show a relationship between spot and implied volatility: volatility tends to fall during calm rallies and rise during sharp selloffs. If a dealer book carries meaningful Vanna exposure, that volatility move changes its Delta and can require a new hedge. The resulting underlying trade can contribute to the same move or resist it depending on the sign of the book.
03
Using VEX carefully
Vanna Exposure, or VEX, aggregates estimated Vanna across positions, but sign conventions and dealer-position assumptions differ by provider. Use VEX as a regime and flow framework, especially around large volatility changes and expirations, rather than assuming every large Vanna level will create an automatic price reaction.
Key takeaway
Vanna explains why a volatility move can become an underlying-market flow even without a large initial move in spot.
CharmGreeksVanna+Charm: The Invisible Drift That Moves Markets
How Charm links Delta to the passage of time and why dealer hedges can change as expiration approaches even with spot unchanged.
7 min readOpen guide
01
What Charm measures
Charm measures how an option's Delta changes as time passes, holding the other inputs constant. Since time to expiration is always falling, Delta exposure can drift even during a quiet market. The effect becomes especially relevant when large positions are close to expiration.
02
Why Charm can create flow
A market maker hedging a large option book targets the book's current Delta, not yesterday's Delta. If time decay changes that Delta, the hedge may need to be adjusted even if spot has not moved. When positioning is concentrated, those adjustments can contribute to recurring buy or sell pressure during the session.
03
Context matters
Charm should not be treated as a clock that predicts a guaranteed move. Its market effect depends on actual inventory, moneyness, expiration, implied volatility, customer flow, and whether other Greeks are creating larger hedge changes at the same time. It is most useful as another layer in a broader dealer-positioning map.
Key takeaway
Charm is time-driven Delta drift. It helps explain why hedging demand can change simply because expiration is getting closer.
VommaGreeksVega+Vomma: The Convexity of Volatility
Understand Vomma, how Vega itself changes when implied volatility moves, and why volatility shocks can create nonlinear option repricing.
6 min readOpen guide
01
What Vomma measures
Vomma, also called Volga, measures the rate of change of Vega with respect to implied volatility. Vega answers how sensitive the option is to volatility right now; Vomma answers how that sensitivity changes if volatility itself moves. It is therefore a second-order measure of volatility convexity.
02
Why it matters in volatility shocks
During a large volatility repricing, assuming Vega stays constant can badly understate how an option position changes. As implied volatility moves, Vega can expand or contract depending on strike, maturity, and moneyness. Vomma helps explain that nonlinear behavior and becomes more relevant when the volatility move is large rather than incremental.
03
Practical use
Use Vomma when stress-testing positions for volatility shocks, comparing structures with similar first-order Vega, or studying how an options book may behave outside its current volatility regime. It should be read alongside Vega, Vanna, skew, and term structure rather than in isolation.
Key takeaway
Vomma is convexity in volatility exposure: it tells you that the Vega you see now may not be the Vega you have after volatility moves.
Educational material only. Options positioning and Greek-based flow models are estimates and should be combined with independent risk management and market context.