Option greeks, translated into what happens to your account

Almost every explanation of the greeks gives you the per-share definition and leaves you there. The trouble is you do not own one share: you own three contracts, and each contract is 100 shares. Until you multiply, the greeks are trivia; afterwards they are your account's risk in cash.

What are the greeks?

They are the option price's sensitivity to each thing that can change: the underlying, the passage of time, volatility and rates. They predict nothing. They tell you what happens to you if that moves a little, right now.

Watch the units, because this is where it all breaks: theta is published PER DAY even though the formula produces it per year, and vega and rho PER PERCENTAGE POINT even though the formula gives them per 100%. Comparing an annual theta against a per-point vega compares two things that are not on the same scale.

Delta: your position translated into shares

A call with a 0.45 delta behaves, for small moves, like 45 shares. Three contracts are 0.45 × 3 × 100 = 135 equivalent shares. That is the number to weigh against the rest of the portfolio, not the 0.45.

Selling flips the sign: a bought put has negative delta, but a SOLD put has positive delta — you gain if it rises. In a multi-leg strategy the deltas add with their signs, which is why a well-centred iron condor comes out near zero delta: you are not betting on direction, you are betting on nothing happening.

Gamma: why yesterday's delta is useless

Gamma is the speed at which your delta changes. With high gamma a position that looked small turns large on its own, without you doing anything: the underlying moves, your delta grows, and suddenly you carry three times the exposure you sized.

Gamma spikes near the strike and near expiry. That is the technical reason at-the-money weeklies are so treacherous: it is not that they move a lot, it is that your exposure gets recalculated under your feet.

Theta: the only certainty

Theta is what a bought option loses to time alone, and it is the only greek whose sign you know in advance: buying, you lose every day; selling, you collect every day. Which is why the useful question when buying is not "will it go up?" but "will it go up enough, and in time?".

In cash: a theta of −0.08 on 3 contracts is −0.08 × 3 × 100 = −$24 a day. That is what holding the position over a weekend costs you with the market doing nothing at all.

Vega: the greek that ruins correct theses

Vega is exposure to implied volatility. It explains the classic case: you get the direction right, the underlying moves your way, and the option is worth less than before because you bought with volatility inflated and then it deflated.

Buying options is being long volatility; selling them, short. Implied volatility rises into an earnings report and collapses after it — that is not a market opinion, it is a mechanical pattern, and a long-vega position suffers it even when the direction is right.

Rho: the one that rarely matters, until it does

Rho measures sensitivity to interest rates. On weekly options it is noise. On options a year or two out it is perfectly capable of being the second largest greek in the position, because its effect grows with the time left to expiry.

What happens when you add legs

A strategy's greeks are not read leg by leg: they aggregate. Each leg contributes its greek multiplied by its sign (bought or sold), by the number of contracts and by the multiplier. The result is a single number per greek for the whole position — and that is the one that tells you whether you are short volatility without having decided to be.

It is the most common mistake in multi-leg strategies: building a spread thinking about direction and discovering the total position is short vega, so a volatility spike hurts you even though price went where you wanted. Add the greeks up BEFORE opening, not after.