Lesson 5

Five numbers that move a price

You do not need a textbook. You need five handles, and a feel for which one is in charge today.

Primer prices every contract with Black-Scholes. That model has a small set of inputs, and each one has a name for “what happens if this input twitches.”

Delta: How much the option moves when ACME moves $1. A 0.50 call behaves, roughly, like 50 shares.
Gamma: How fast delta itself changes. Near the strike, near expiry, gamma is loud.
Theta: What one day of waiting costs the long, in dollars per share.
Vega: How much the option moves if vol rises by one point. Big vega means the price is a vol bet as much as a direction bet.
Spot: The stock itself. Everything else is a sentence about this number.

Delta is the slope. A call near 0.5 is a coin-flip on direction. A put near −1 already behaves like short stock.

You do not have to memorize formulas. On the desk, each quote shows these numbers. Read them as a weather report. A 0.15 delta, 2 days left, fat premium: the clock is the story, not the stock.