Greeks for Short Straddle Option: Delta, Gamma, Rho, Vega Theta: Options, Futures, Derivatives & Commodity Trading

Greeks for Short Straddle Option: Delta, Gamma, Rho, Vega Theta

Details about Greeks (Delta, Gamma, Rho, Vega Theta) for Short Straddle Option Trading

Continuing further from our earlier part on Tips to Enter & Exit Short Straddle Options Trading Position, here are the details about Greeks for Short Straddle Option.

Dotted line indicates a shorter maturity option Greeks while the solid line represents the long maturity option Greeks.

Greeks form an important quantitative measure for any option trade. Here are the details for Short Straddle Option Trade and their corresponding Greek Values.
Delta Gamma Short Straddle

Delta for Short Straddle Option : it measures the speed at which the option price moves with respect to the underlying.

Don't consider the sign (negative or positive) of the delta as shown in the graph above - just concentrate on the magnitude value of the delta. It indicates that on either side (upward or downward), the short straddle is highly sensitive to the underlying price movements and will adversely affect the short straddle options trader position.

The zero value of delta is near the ATM strike price indicating benefit to the trader.

Gamma for Short Straddle Option Trading:

As can be seen, the Lowest value of Gamma is somewhere near the ATM strike price and then it goes up in either direction - indicates that this highest point (ATM strike) is the turning point of profit direction. It is completely negative and in either direction it is loss making to the Short Straddle Option trader
Greeks Short Straddle

Short Straddle Greeks: Delta, Gamma, Rho, Vega & Theta

Theta for Short Straddle Option Trading:

Time decay is the biggest and the sole beneficiary for the Short Straddle Option Trader. If the underlying stock doesn’t move much, it is this income which the option trader is betting his luck on.

It has its best effect when the underlying price stays at and around the ATM strike price, as shown in the graph.

Vega for Short Straddle Option Trading:

Volatility will have negative impact if the position is in the profit region and the other way round. For e.g., If nothing else changes, the higher implied volatility will keep the options prices high which will be loss making to the Short Straddle Option trader. Hence, Vega graph peaks at the center in the negative side.

Rho for Short Straddle Option Trading:

Rho measures the interest rate sensitivity to option positions.

Higher values of interest rates will be bad for the Short Straddle Option Trader as indicated in the graph and vice versa.

Short Straddle Option Trading
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