How Does the ‘Greeks’ Help a Market Maker Manage Inventory Risk?

The Greeks (Delta, Gamma, Vega, Theta, Rho) are sensitivity measures that quantify how an option's price changes relative to various market factors. Market makers use them to understand and manage their inventory risk.

Delta is used for directional risk, Gamma for change in directional risk, and Vega for volatility risk. By keeping their portfolio "Greeks-neutral," they minimize the impact of adverse market movements on their overall inventory.