Portfolio Greeks Dashboard & Limits

Educational use only — not investment advice. See full disclaimer in README.md.

Individual trades each look fine; the danger is what they sum to. Many traders accidentally become massively short volatility (or wildly long delta) without realizing it, because they only ever look at one position at a time. This file is the daily habit that prevents that: roll every position’s Greeks up to a portfolio total, compare against pre-set limits, and act when a limit is breached. Greek definitions and signs live in ref-greeks-iv-mechanics.md; this is the aggregation and limits layer.

1. Why portfolio Greeks, not position Greeks

Position Greeks tell you how one trade behaves. Portfolio Greeks tell you how your whole book behaves on the next market move — which is what actually determines your P&L and your risk of a bad day. The four that matter:

Net Greek Answers The hidden risk it exposes
Net delta (beta-weighted) “If the market moves 1%, how much do I make/lose?” You’re far more directional than you think — five “neutral-ish” trades can sum to a big long/short bet
Net theta “How much time decay do I collect/pay per day?” Premium sellers want this positive; if it’s negative you’re paying to wait
Net vega “If IV rises/falls 1 point, how much do I make/lose?” The big one. A book of credit spreads is heavily short vega — a market-wide IV spike hits every position at once
Net gamma “How fast does my delta change as price moves?” Short-gamma books (premium sellers) get hurt by fast moves near expiry; losses accelerate

The classic blow-up: a trader sells premium across many names, feels “diversified,” and is actually running one giant short-vega, short-gamma, negative-correlation-blind bet. A single VIX spike margin-calls the whole book. Net vega would have shown it weeks earlier.

2. Beta-weighted net delta — the one most people get wrong

Raw delta added across different underlyings is meaningless (1 delta of a $40 ETF ≠ 1 delta of a $900 stock, and they don’t move together). Beta-weight everything to one benchmark (SPY) so the number is a single, honest “SPY-equivalent” directional exposure.

Beta-weighted delta of a position = position delta × beta(underlying vs SPY) × (underlying price ÷ SPY price)

Portfolio net beta-weighted delta = Σ (beta-weighted delta of each position)

This expresses your entire book as “equivalent shares of SPY.” (Most platforms — thinkorswim, IBKR — compute this for you; the formula is here so you know what it means.) See ref-greeks-iv-mechanics.md §4 for the per-position version.

Worked example. You hold: a bullish NVDA spread (+30 raw delta, NVDA beta ≈ 1.6, price 900) and a bearish XLF spread (−40 raw delta, XLF beta ≈ 1.1, price 40). SPY = 500.

  • NVDA: 30 × 1.6 × (900 ÷ 500) = 30 × 1.6 × 1.8 = +86.4 SPY-deltas
  • XLF: −40 × 1.1 × (40 ÷ 500) = −40 × 1.1 × 0.08 = −3.5 SPY-deltas
  • Net = +82.9 SPY-deltas → you’re long the equivalent of ~83 shares of SPY (~$41k of long exposure). The “balanced bull/bear” book is actually almost entirely a NVDA-driven long — the small-dollar XLF leg barely offsets it. That is what beta-weighting reveals.

3. Set your portfolio limits (once)

Pick numbers and enforce them. Starting points (scale to account size and risk appetite):

Limit Conservative Standard Notes
Max net beta-weighted delta ±0.3% of account per 1% SPY move ±0.5% Cap directional exposure; “market-neutral-ish” means keeping this small
Max net vega (short) loss ≤ 1% of account per +1 vol point ≤ 2% The critical one for premium sellers — stress a +5 to +10 VIX day
Max net theta n/a (sign preference) — Sellers want positive; just know the sign and size
Net gamma avoid large short gamma near expiry — Tie to the 21-DTE rule (ref-management)
Single-underlying delta share ≤ 25% of net delta ≤ 40% No one name dominates your directional risk (the NVDA lesson above)
Correlated-cluster exposure ≤ your per-sector risk cap — Tech megacaps move together — treat them as one bet (03)

Stress test, don’t just measure. The useful question isn’t “what’s my vega?” — it’s “what does a +8 VIX, −5% SPY day do to my account?” Compute that occasionally (most platforms have a “what-if”/risk-slide tool). If the answer scares you, you’re too big — reduce before the day arrives.

4. The daily dashboard (copy this)

Fill this in during Step 0 of the daily workflow, before hunting new trades. A new trade that pushes any line past its limit doesn’t get placed (or gets paired with an offsetting one).

═══════════════════════════════════════════════════════════
 PORTFOLIO GREEKS DASHBOARD            Date: __________
───────────────────────────────────────────────────────────
 Account net liq: $__________
 NET BETA-WTD DELTA : ______  (SPY-equiv shares ≈ $______)   limit: ±______  [ ok / OVER ]
 NET VEGA           : ______  ($ per +1 vol pt)              limit: ______   [ ok / OVER ]
 NET THETA          : ______  ($ per day)   sign ok? Y/N
 NET GAMMA          : ______  (short/long?)  any position ≤21 DTE? Y/N
───────────────────────────────────────────────────────────
 Largest single-name delta share: ______ %   (limit ___%)   [ ok / OVER ]
 Largest correlated cluster:      ______ %   (limit ___%)   [ ok / OVER ]
 STRESS: SPY −5% & VIX +8  →  est. P&L: $______   acceptable? Y/N
───────────────────────────────────────────────────────────
 ACTION if any OVER:  ☐ no new same-direction risk  ☐ add offsetting/hedge
                      ☐ trim largest contributor     ☐ reduce size today
═══════════════════════════════════════════════════════════

5. What to do when a limit is breached

  • Net delta too long/short → stop adding same-direction trades; add an offsetting position or a small index hedge (strat-hedging.md) to re-center toward neutral (or your chosen directional band).
  • Net vega too short → stop selling premium; close your weakest short-premium position, or buy some vega (a long calendar / long option) to offset. Especially important when IVR is low (little premium to justify the tail risk) or term structure is inverting.
  • Net gamma too short with positions ≤21 DTE → roll out or close the near-dated shorts (the 21-DTE rule exists for exactly this).
  • One name / cluster dominates → trim it. Correlation is hidden leverage; a “diversified” tech-megacap book is one trade.

The discipline: your book’s Greeks are a position you hold whether you look at them or not. Looking at them daily — and respecting the limits — is what separates running a portfolio from running a pile of trades.

Related: per-position Greeks → ref-greeks-iv-mechanics.md · sizing & correlation caps → 03-risk-and-sizing.md · regime shifts that move your whole book → ref-regime-transitions.md