Greek Aggregation and Book Risk
From a single contract's Greeks to a portfolio's risk profile
A trading desk has 47 open option positions across 12 underlyings, four expirations, and twenty-eight different strikes. Each position has its own Delta, Gamma, Theta, Vega, and Rho. Looking at any single contract tells the trader almost nothing about how the book will behave tomorrow morning.
The book's behavior is determined by the net of all those exposures — and the net is almost never visible from any single trade ticket. This is the core operational problem of running an options book at any meaningful scale: hundreds of individual Greeks must be summed, weighted, and bucketed by tenor and underlying into a small number of dashboard numbers that tell the trader what the book actually is. Get this aggregation right and the book is a controlled vehicle that expresses specific volatility and directional views with quantified exposures.
Get it wrong and the book is a black box where any of dozens of unhedged risks can be the one that produces tomorrow's loss.
That is the opening. Finishing a lesson is where it stops being interesting and starts being useful: the full lesson runs to 9 sections and ends with 6 practice questions. A free account is what opens the rest, and the other 255 lessons in the Academy with it. No card.
What this lesson covers
- 1Net Delta — the simplest aggregation, and the one that breaks first under stress
- 2Vega bucketing by tenor — why $100K of front-month vega is not the same as $100K of back-month vega
- 3Book Greek Calculator
- 4Greek aggregation formulas at the book level
- 5Worked example — a 3-position book aggregated to net Greek dollars
- 6Vega bucketing example — same notional, two very different tenor profiles
- 7Barings Bank, January 1995 — when concentrated, unaggregated Greeks broke a 233-year-old institution
- 8Where to see this on the platform
- 9Summary