Role of Options Greeks in Covered Call Writing

In this article, we will discuss:

During times when stock prices are unlikely to show a further upward rise, traders usually resort to using covered calls. It is a trading strategy in which an individual sells call options for stocks which he/she already owns in order to sell them at the strike price on or before expiry. 

Now, using this strategy is a sure-shot way of booking profits provided you choose the right strike price. In this regard, experts recommend consulting Options Greeks. These indicators will help you assess several factors and select a strike which can be the most profitable as per your investment objective. 

Keep reading to learn how. 

How Do Options Greeks Assist in Covered Call Writing?

In order to understand how options Greeks can assist in covered call writing, first you need to have an idea of the Greeks themselves. Here they are:

All factors remaining the same, the price of an options contract tends to decrease as its expiry date approaches. This is known as time erosion and is represented by the options Greek called Theta. 

Now, this time value decay is not linear. Thus, the time value erosion of ITM, ATM and slightly OTM options will tend to increase as the expiration date approaches. Alternatively, for far out-of-the-money options, this factor usually decreases.     

Usually, the Theta value is negative for most options. However, it shows the most negative values when the option is at-the-money.  

Thus, by analysing Theta, you will have a clear idea of how much value your covered call can fetch and set the option contract’s parameters accordingly. 

Delta measures the price changes of options contracts in relation to the change in the underlying asset’s value. It is calculated by using the formula:

Delta = ∂V/AS


∂ is the first derivative 

S is the underlying asset's price

V is the option's price

Now, Delta values are represented in decimals ranging from -1 to 1. Call options generally have a Delta of 0 to 1, while put option Delta values range from -1 to 0. 

ATM call options usually have a Delta of around 0.50. As it goes deeper in-the-money, this value approaches 1 as the date of expiry approaches. However, for OTM call options, it nears 0 as the expiration date nears. 

Coming to puts, ATM options in this case have Delta values of around -0.50. ITM puts will start approaching -1.00 as expiry nears and OTM puts will reach 0.00.      

Thus, while covered call writing, you can assess Delta and frame your contract based on your underlying stock’s probable movements within the contract’s time frame.    

Gamma measures the rate of change in Delta with a change in the underlying security’s value. It means that when the asset's price increases or decreases, it would reflect a change in the Delta by a Gamma amount. 

Gamma, like Delta, is indicated in the form of decimals. Options contracts usually exhibit maximum Gamma values when they are ATM. But if they go deep into ITM or OTM, this metric tends to decrease. 

Furthermore, as Gamma values are determined based on Delta, they can never be more than the latter. 

So, while framing your covered calls, Gamma can come in really handy to understand the rate of change in Delta.  

  • Rho

Rho indicates a change in an options contract's price with a 1% change in interest rates. Thus, if a benchmark rate increases or decreases, it will reflect the same by the Rho amount on the option’s price. 

Now, as interest rate increases, the Rho value of call options rises and vice versa. However, for put options, Rho value falls with interest rate hikes. Thus, call and put options usually have positive and negative Rho values respectively. 

Vega measures the change in an option’s price depending upon the price volatility of its underlying asset. That is, a 1% change in the underlying asset's volatility will be represented by a Vega amount.

While trading in Option Greeks, this is one of the most important factors that you should consider as it directly affects the contract’s value. A rise in Vega values will cause both call and put options to appreciate in price and vice versa. 

Thus, while writing covered calls, you should put additional focus on Vega. 

How Can Samco Change Your Trading Game?

Now, to calculate Options Greeks before framing your covered calls, you need to use an options calculator. This can be quite hectic and switching between apps can often lead to mistakes. 

In this regard, the New-Gen Samco app is a game-changer. It contains an options calculator which can help you calculate these values in the app itself. Furthermore, if you wish to buy options contracts, Samco shows you their options Greeks values, enabling you to make an informed choice. 

Apart from this, the platform analyses your past trades and generates personalised insights in order to improve your future ones. 

So, download the Samco app today and take your trading game to the next level!


Now, Options Greeks can come in really handy for predicting options price movements. However, you should remember that they generate values based on mathematical formulae and may not always reflect real-time market conditions. 

Thus, while framing covered calls, you should also rely on market trends, and news and make decisions after assessing your risk appetite.  


  • Why do traders use options Greeks?

Ans. Traders use options Greeks in order to measure the sensitivity of an options’ value to factors like changes in the underlying asset's price, expiration date, market volatility, interest rates, etc.  

  • What are the minor Greek options?

Ans. Minor Greek options are second and third-order derivatives which indicate changes in risk factors represented by the major Greeks. Some examples in this regard are Epsilon, Lambda, Vera, Vomma, Zomma, Color, Ultima and Speed. 

  • How to calculate options greeks?

Ans. You can easily calculate options Greeks by using an options calculator. It inputs data like the underlying asset’s trading price, transaction and expiry dates, interest rate, etc. to generate its results.

Disclaimer: INVESTMENT IN SECURITIES MARKET ARE SUBJECT TO MARKET RISKS, READ ALL THE RELATED DOCUMENTS CAREFULLY BEFORE INVESTING. The asset classes and securities quoted in the film are exemplary and are not recommendatory. SAMCO Securities Limited (Formerly known as Samruddhi Stock Brokers Limited): BSE: 935 | NSE: 12135 | MSEI- 31600 | SEBI Reg. No.: INZ000002535 | AMFI Reg. No. 120121 | Depository Participant: CDSL: IN-DP-CDSL-443-2008 CIN No.: U67120MH2004PLC146183 | SAMCO Commodities Limited (Formerly known as Samruddhi Tradecom India Limited) | MCX- 55190 | SEBI Reg. No.: INZ000013932 Registered Address: Samco Securities Limited, 1004 - A, 10th Floor, Naman Midtown - A Wing, Senapati Bapat Marg, Prabhadevi, Mumbai - 400 013, Maharashtra, India. For any complaints Email - Research Analysts -SEBI Reg.No.-INHO0O0005847

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