Option Greeks are referring to the various factors that affect option prices. They are called Greeks based off of the Greek names associated with the factors that they stand for. When using any option calculator, the calculator is calculating a theoretical value of an option based off of the various factors that affect the option price. The calculators are using a Nobel Prize winning formula to come up with the theoretical value. The Black-Scholes Model is the basis for these option calculators. Some calculators may tweak the formula slightly to calculate the value.
When using the calculators, you can change the different factors and re-calculate the theoretical value of the option. Essentially, the calculator is giving an appraisal of the supposed worth of the option. The Greeks are referencing each specific factor that affects the option price. The Greeks are called delta, gamma, rho, theta, and vega. Each of the Greeks gives the price impact of a 1 unit move of the factor involved.
Delta represents a $1 change in the underlying stock with no other factors involved. At the money options are typically about a $.50 delta. The delta approaches $1.00 as the option moves deeper in the money. Farther out of the money options approach $0.00.
Gamma represents the change in the delta for every $1 move in the stock. As options get deeper in the money, the delta approaches $1.00 in the increments represented by the gamma.
Rho is referring to the impact on the option price if there is a 1% change in the interest rates. These changes are negligible. Considering interest rate changes do not happen very often, and that the rate changes are very small if they do occur, there is not much impact on option prices.
Theta is the impact of time decay by 1 day. As expiration nears, the impact of the 1 day starts to increase. Options deep in the money are not greatly impacted by time decay.
Vega represents the impact caused by a 1% change in the implied volatility. This can make a huge difference in the option. Depending on the stock, implied volatility might drop by 20 or more % points and can easily have the biggest effect on option prices. Deeper in the money options are not as impacted by the implied volatility.
The option calculators calculate the theoretical value by taking into account all the variables of the options. The Greeks are just considering the change of the option price based on the one variable by itself with no other factors involved. Remember the Greeks represent a 1 unit move only.
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