← AdvancedLesson 10 · 3:42
How do you read a whole portfolio's risk?
Summary
You can add several positions into one book: their lines price by price and their Greeks number by number. You can read a risk matrix across price and volatility and spot where one position offsets another.
Key terms
- book
- All the positions you hold, read together as one result.
- net Greeks
- The Greeks of every position added together, giving one delta, gamma, theta and vega for the book.
- vega
- How much an option's price moves when implied volatility changes by one point.
- risk matrix
- A grid of your profit or loss with days left down the side and the stock price across the top.
Check yourself
Answer each question to see why the right answer is right.
1. How do you get the last-day line for a whole book of three positions?
2. You hold 50 shares (delta 50), a sold put spread (delta 16) and a bought call (delta 30). How does the book act?
3. The put spread earns $2 a day and loses $4 per volatility point. The call costs $5 a day and gains $10 per point. What is the book's theta and vega?
4. In the book's risk matrix, the colour changes a lot reading across the prices but barely changes reading down the volatility rows. What kind of bet is the book?
5. At $100, a jump to 45% volatility loses $49 without the call but gains $109 with it. What does this show?
Finished the video and the quiz? .