What it is
The Greeks are the partial derivatives of an option's theoretical value with respect to the variables that drive it. They translate a position into a set of exposures that can be aggregated, hedged and monitored, which is why every options desk speaks in them rather than in contracts.
How it works
Delta is sensitivity to the underlying price and, for a portfolio, is the equivalent share position. Gamma is the rate of change of delta and describes how fast that exposure shifts. Theta is the change in value per day from the passage of time. Vega is the change per one point of implied volatility. Rho is sensitivity to interest rates and matters mainly for long-dated options. Second-order measures — vanna, the sensitivity of delta to volatility, charm, its decay over time, and volga — become important for larger books.
How traders use it
In practice the Greeks are used to construct a position that expresses a specific view: long gamma and short theta for someone expecting movement, short vega for someone expecting volatility to fall, delta-neutral for someone with no directional opinion at all. Aggregating them across a book turns a collection of contracts into a handful of numbers a risk manager can act on.
Where it breaks down
They are local, model-dependent approximations. They describe the response to a small change from current conditions and are themselves functions of spot, volatility and time, so they can change dramatically overnight; gamma near the strike close to expiry is the classic example. Delta is often described as the probability of finishing in the money, which is a convenient approximation to a risk-neutral quantity and not a real-world probability. And netting Greeks across different expiries can hide term-structure risk that a single aggregate number will never reveal.
Educational reference. This entry describes how a concept is defined and used. It is not investment advice, not a recommendation, and not a signal. Any rule you build from it should be tested with realistic costs before it is traded, and no historical result guarantees a future one.