Options risk exposure
What is the best method for calculating the risk exposure caused by a portfolio of short options (i.e., we've been writing options)?
Trending Content - Sales and Trading Forum
| +14 | Natural Gas Analyst Path to Trader | 3 | 3d |
| +9 | looking for advice | 1 | 1d |
| +6 | Exiting Sell Side FI Trading | 1 | 6d |
| +6 | S&T Outlook and Pivot from Buy Side | 2 | 5d |
| +6 | EM Resources / Study Material | 1 | 4d |
| +6 | JPM Quant/Trading Base Salary in London? | 1 | 1d |
Career Resources
What do you mean? What's wrong with the greeks?
Bust it.
Aiyyaaa. No of course this isn't true. The Greeks are a way to generalize the sensitivities of options, which of course allows us to view risk in the context of portfolio of many options. For a practitioner, V@R is a bit of a funny thing as it is supposed to tell you the probability of an $ X loss over Y timeframe, usually using history as a guide. It will not tell you what you are sensitive to, or what risk you are really running.
Thanks, that's been helpful. For a portfolio of options could you just take the average vega, for example, of all the options in the portfolio and use that to express the portfolio's sensitivity to imlied vol?
Greeks are additive... I'd really suggest you learn more about options before trading them or it can end in tears.
I'm not trading them. I have to do a risk analysis on a portfolio of options. Our firm is new to this. I will read up on them, but any help is appreciated.
Et deleniti accusantium non quisquam atque. Mollitia at sit suscipit quidem quia. Rerum error nobis eos explicabo dolorem dolorem ipsum. Laudantium recusandae praesentium et nihil laudantium labore. Iure dolor non molestias vero dolor.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...