š Initial Greeks
In multi-leg options strategiesālike straddles, butterflies, or diagonalsāthe initial Greeks represent the combined sensitivities of the entire position to changes in market variables. Each leg contributes its own Greek values, which are aggregated to assess overall risk and behavior.
š§® Key Greeks Tracked Initially
- Delta (Ī): Measures directional exposure. A neutral strategy (e.g., iron condor) starts with near-zero delta.
- Theta (Ī): Time decay. Positive theta strategies (e.g., credit spreads) benefit from time passing.
- Gamma (Ī): Rate of change of delta. High gamma means delta shifts rapidly with price movement.
- Vega (Ī½): Sensitivity to volatility. Long vega positions benefit from rising implied volatility.
- Rho (Ļ): Sensitivity to interest rate changes. Often minimal for short-term trades.
š Per-Leg Greek Breakdown
| Leg |
Type |
Delta |
Theta |
Gamma |
Vega |
| Leg 1 |
Long Call (ATM) |
+0.50 |
-0.03 |
+0.10 |
+0.12 |
| Leg 2 |
Short Call (OTM) |
-0.25 |
+0.02 |
-0.05 |
-0.08 |
| Leg 3 |
Long Put (OTM) |
-0.40 |
-0.02 |
+0.08 |
+0.10 |
āļø Strategy-Level Greeks
- Net Delta: Sum of all leg deltas (e.g., -0.15 ā slightly bearish)
- Net Theta: Indicates time decay impact (e.g., -0.03 ā time decay cost)
- Net Vega: Volatility exposure (e.g., +0.14 ā benefits from rising IV)
š§ Pro Tip
Initial Greeks help traders anticipate how the strategy will behave before execution. They evolve as the underlying price, volatility, and time changeāso dynamic monitoring is essential.