I have often wondered what kind of risk restrictions do traders of options in Hedge funds have but have not managed to find any information on this matter. I presume there must be some kind of measure for a Portfolio Manager (PM) to decide whether to approve their trades or not. However, I cannot find any data about what kind of risk measure would be used. Let me give an example. Let us say I want to buy an FX barrier option, taking a directional bet. Would then the PM come to me and say: I think you have too much Delta/Gamma/Vega etc.? To be more specific, what is the relationship between risks (e.g. Delta/Gamma/Vega, Theta) and the potential return that a typical Hedge Fund or trading desk accept? Is there some literature on this? What kind of option strategies are typically used to minimize risk-adjusted return?