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+Greeks and Wing Spreads
+Much of this chapter has been spent on how wing spreads perform if held
+until expiration, and little has been said of option greeks and their role in
+wing spreads. Greeks do come into play with butterflies and condors but not
+necessarily the same way they do with other types of option trades.
+The vegas on these types of spreads are smaller than they are on many
+other types of strategies. For a typical nonprofessional trader, it’s hard to
+trade implied volatility with condors or butterflies. The collective
+commissions on the four legs, as well as margin and capital considerations,
+put these out of reach for active trading. Professional traders and retail
+traders subject to portfolio margining are better equipped for volatility
+trading with these spreads.
+The true strength of wing spreads, however, is in looking at them as
+break-even analysis trades much like vertical spreads. The trade is a winner
+if it is on the correct side of the break-even price. Wing spreads, however,
+are a combination of two vertical spreads, so there are two break-even
+prices. One of the verticals is guaranteed to be a winner. The stock can be
+either higher or lower at expiration—not both. In some cases, both verticals
+can be winners.
+Consider an iron condor. Instead of reaping one premium from selling one
+OTM call credit spread, iron condor sellers double dip by additionally
+selling an OTM put credit spread. They collect a double credit, but only one
+of the credit spreads can be a loser at expiration. The trader, however, does
+have to worry about both directions independently.
+There are two ways for greeks and volatility analysis to help traders trade
+wing spreads. One of them involves using delta and theta as tools to trade a
+directional spread. The other uses implied volatility in strike selection
+decisions.