
Continuing further from our earlier part on Tips to Enter & Exit Short Strangle Options Trading Position, here are the details about Greeks for Short Strangle 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 Strangle Option Trade and their corresponding Greek Values.
Delta for Short Strangle Option : it measures the speed at which the option price moves with respect to the underlying.
The Short Strangle is highly sensitive to the underlying price movements and will adversely affect the Short Strangle options trader position.
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.
Gamma for Short Strangle Option Trading:
The rate of change of Delta or second derivative of option pricing with respect to the underlying price.
As can be seen, the Lowest value of Gamma is somewhere near the average of the two strike prices of calls and puts. It then goes up in either direction
Short Strangle Greeks: Delta, Gamma, Rho, Vega & Theta
Theta for Short Strangle Option Trading:Time decay is the biggest and the only factor which benefits the Short Strangle 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 between the 2 strike price i.e. in the profit region.
Vega for Short Strangle 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 Strangle Option trader. Hence, Vega graph peaks at the center in the negative side.
Rho for Short Strangle Option Trading:
Rho measures the interest rate sensitivity to option positions.
Higher values of interest rates will be bad for the Short Strangle Option Trader as indicated in the graph and vice versa.
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