Tweaking Greeks
With this position, some risks are of greater concern than others. Kim may
want more exposure to some greeks and less to others. What if she is
concerned that her forecasted price increase will take longer than three
weeks? She may want less exposure to theta. What if she is particularly
concerned about a decline in IV? She may want to decrease her vega.
Conversely, she may believe IV will rise and therefore want to increase her
vega.
Kim has many ways at her disposal to customize her greeks. All of her
alternatives come with trade-offs. She can buy more calls, increasing her
greek positions in exact proportion. She can buy or sell stock or options
against her call, creating a spread. The simplest way to alter her exposure to
option greeks is to choose a different call to buy. Instead of buying the ATM
call, Kim can buy a call with a different relationship to the current stock
price.