Omega

Philosophy gets complicated. Categorical imperatives. Dialectical materialism. The mind-body problem.

You know what else gets complicated? Options pricing. It's no surprise, therefore, that there are two main places where Greeks get a lot of attention: philosophy and options pricing (and salads, we guess, but those aren't very complicated, so it kind of ruins the little rhetorical thing we're trying to do here).

In option trading, the Greeks describe the relationships of various measures connected to an option's price. Omega represents a particular kind of Greek. It tracks the percentage change in an option's value compared to the percentage change in the value of the underlying asset.

As Greeks go (option-related Greeks, that is), Omega is relatively easy to compute. You have an option to purchase 100 shares of AMZN at $1,800, expiring in two months. AMZN, in this case, represents the underlying asset. Its share price rises 12%. Your option price rises 10%. The Omega for that situation is 10% over 12%, or 0.833. You'd expect a 1% rise in AMZN's stock to lead to a 0.833% rise in your option price (or vice versa: a 1% decline would lead to a 0.833% fall in your option's price).