3
$\begingroup$

Just want to confirm whether Delta, Gamma, Theta, Vega will be calculated in the following way? Since we own 100 shares of stock while selling a call we need to subtract greek value from one? right?

Covered Call Delta = 1 - "Long Call delta"

Covered Call Gamma = 1 - "Long Call gamma"

Covered Call Theta = 1 - "Long Call theta"

Covered Call Vega = 1 - "Long Call vega"

$\endgroup$
  • $\begingroup$ Just my 2 cents, should my hunch be right that you are a developer haunted with the daunting task to implement financial options concepts without a clear road map then I highly recommend you to go back to your project manager or trading desk head and ask them to walk you though all the concepts themselves. That is not your job and you should not have to bother with that. Its as if a trader is asked to program an FPGA board. Ask them to give the formulae and functions to you and be available to answer any finance theory related questions... $\endgroup$ – Matt Oct 29 '13 at 3:25
3
$\begingroup$

You are right for delta but wrong for other greeks.

Delta of stock is 1 so Covered call Delta = 1 - "long call delta" is correct

However a stock doesn't have gamma , theta or vega. So these greeks of your covered call positions will be just that of short call. i.e

Covered Call Gamma =  - "Long Call gamma"

Covered Call Theta =  - "Long Call theta"

Covered Call Vega =  - "Long Call vega"
$\endgroup$
  • $\begingroup$ Correct. An alternative way is to remember that a covered call is actually a synthetic short put at the same strike as the call. So the Greeks will be that of a short put. $\endgroup$ – Victor123 May 29 '15 at 20:24
1
$\begingroup$

Check out this post: http://www.macroption.com/option-greeks-excel/

Let me know if it answers your query.

The Excel equations used to calculate Delta, Gamma, Theta and Vega are shown in the above link.

$\endgroup$
  • $\begingroup$ Hi Chris Andy, welcome to Quant.SE! Could you please edit your answer so it stands on its own? These links on their own, while useful, do not make a good answer. $\endgroup$ – Bob Jansen Apr 16 '16 at 8:44

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.