What is ‘Omega’
In finance, omega represents the percentage change in an option’s value with respect to the percentage change in the underlying price. Omega (Ω) measures the leverage of an options position.
Explaining ‘Omega’
For example, if Ford Motor Co (F) shares increase 7% in a given period and a Ford call option increases 3% in that same period, the omega of the call option is 3 ÷ 7, or 0.43. This would imply that for every 1% Ford stock moves, the call option will move 0.43%.
Options Greeks
Omega is one of the Greeks, a set of metrics that give a sense of an options contract’s risk and reward with respect to different variables. While there are many Greeks, omega is one of a limited number of first-order Greeks, meaning that it relates directly to the value of an options contract, rather than to another Greek. The most common first-order Greeks are:
Relationship to Delta
The equation for omega can also be expressed:
Further Reading
- Workshop on the essentiality of and recommended dietary intakes for omega-6 and omega-3 fatty acids – www.tandfonline.com [PDF]
- Relationships among the academic business disciplines: a multi-method citation analysis – www.sciencedirect.com [PDF]
- Big data, computational science, economics, finance, marketing, management, and psychology: connections – www.mdpi.com [PDF]
- Stochastic dominance and omega ratio: Measures to examine market efficiency, arbitrage opportunity, and anomaly – www.mdpi.com [PDF]
- Crypto-assets portfolio optimization under the omega measure – www.tandfonline.com [PDF]
- Omega-6/omega-3 essential fatty acid ratio and chronic diseases – www.tandfonline.com [PDF]
- Omega-3 fatty acids in inflammation and autoimmune diseases – www.tandfonline.com [PDF]
- Ratio of omega‐6 to omega‐3 fatty acids and childhood asthma – www.tandfonline.com [PDF]
- Open trial of supplements of omega 3 and 6 fatty acids, vitamins and minerals in atopic dermatitis – www.tandfonline.com [PDF]
- Omega portfolio construction with Johnson distributions – ideas.repec.org [PDF]
