How are the Volcube Vega and Gamma risk limits and the Volcube Risk Metric calculated?

The Volcube Risk Limits are set automatically by the synthetic Volcube Risk Manager. This Risk Manager works in much the way a real-world derivatives risk manager works. With respect to gamma risks; the way these are calculated is that the gamma risk is your maximum loss up and down a certain number of standard deviations away from the spot price. Only short gamma is seen as a risk. With vega, there is a maximum amount of at-the-money vega (either long or short) that can be held and a maximum amount of vega at the ends of the Risk Detail. This is precisely how a typical options risk manager will analyse a portfolio. You may find the Market Mentor tool is helpful; click the MM bubble in the top panel of the Messenger to get help with your Risk. The Volcube Risk Metric (VRM) is just our way of summarising all your gamma and vega risk in one number and it sums the five individual risk limits shown in the Risk Limit panel.

There is plenty of material in the Volcube Learning environment that can help with this. Please check out Blitz Video #4 Trading within Risk Limits in Learning\Options videos. Also check out the article in Learning\Options articles\Option Risk\About Volcube risk limits.

 

Have a question for the author? Happy to help! Email [email protected].

About Volcube

Volcube is the world’s leading options education technology, trusted by traders and other individuals everywhere as the fastest way to learn about options trading.

FREE TRIALS of Volcube Starter Edition : start your options education for FREE!

You can access Volcube Starter Edition for FREE. Starter Edition has been designed specifically for individuals who want to learn about options trading from home or at work. If you want to learn about options trading, try Volcube out for free today! Click here to get start your completely FREE trial.

 

———————————————-

The Best-Selling Volcube Ebook on Trading Implied Volatility

Available now!

  • Volume IV – Trading Implied Volatility – An Introduction

    What is implied volatility? How is it traded? What implied volatility trading strategies are commonly used in the derivatives markets? These questions and more are examined in this concise ebook introduction to trading implied volatility. This is the 4th volume of the popular Volcube Advanced Options Trading Guides series. Part I introduces implied volatility. It […]

    Order Volcube Advanced Option Trading Guides - Volume IV Trading Implied Volatility @ $9.99

 

Volcube : options education technology

Volcube : options education technology

  • Start your FREE Volcube trial.
  • * Login to Volcube via your web browser.
  • * Trade on the options market simulator.
  • * Learn from the options trading videos.
  • * Test your trading ability with Volcube trader metrics.
  • * Become a Certified Options and Volatility Trader

Find out more

Support

Contact Volcube Support at any time on

[email protected]