Options portfolio - from a single position to a process

One option is a bet. An options portfolio is a process of managing exposures: Delta, Gamma, Theta, Vega and capital over time. The difference between a gambler and an options trader is not the win rate, but whether the portfolio survives 20 losers in a row without a margin call.

This lesson closes the course: how to combine spreads, the Wheel and the Greeks into one measurable plan.

Why a portfolio, not 1 strategy

Portfolio goal: survive 6 months, not make 20% in a month.

Building a portfolio step by step

Step 1: Capital and Buying Power
Capital = 10,000 USD example
The 50% rule: Never use >50% of Buying Power at once for spreads. That 50% is a buffer for rolls and gaps.
So a max of 5,000 USD in margin for positions.

Step 2: Exposure limits (hard rules)
Max net Delta of the whole portfolio: +/- 30 per 10k USD (equivalent of 30 SPY shares)
Max daily Theta: +0.1% to +0.3% of capital (that is +10 to +30 USD a day per 10k)
Max Vega: +/- 1% of capital per 10% IV move (that is -100 USD Vega per 10k)
Max loss on 1 ticker: <2% of capital
Max 5 tickers, max 2 from the same sector

Step 3: Strategy allocation
Example 10k USD:
40% = Defined-risk income: Bull Put Spreads 30-45 DTE, 0.15-0.20 short delta, 5 USD wide
30% = Wheel on 1-2 ETFs/dividend stocks (SPY, QQQ, SCHD, KO)
20% = Hedging / Long Gamma: Long Put Spread 60-90 DTE on SPX as insurance for the stock portfolio
10% = Cash / opportunistic (earnings debit spreads, controlled lotto)

Step 4: Calendar
Monday: Check portfolio Delta/Theta/Vega, the week's earnings calendar
Wednesday: 50% profit check – close spreads that have reached 50% of max profit
Friday: Time decay check – is anything <7 DTE and needing action (roll/cut)

Portfolio metrics you have to know

1. Portfolio Theta % = (Daily Theta sum / Capital) * 100
Target: +0.1% to +0.3% = 36% - 109% a year theoretically, but after losses realistically 15-25%

2. Portfolio Delta $ = Delta sum * 100
Example: Delta +60 = as if you held +60 SPY shares. With SPY at 500 USD, 60 shares = 30k of delta exposure.

3. Vega Risk = Vega * 10% IV drop
That is how much you lose/gain when IV falls by 10%. It should be < 2% of the account.

4. Buying Power Usage = Used BP / Total BP
Target 30-50%. >70% = no room left to manage a loser.

5. P&L broken down:
P&L Theta (how much you earned on time) vs P&L Gamma (how much you lost on moves) vs P&L Vega
If P&L Gamma > P&L Theta for 3 months, you are selling gamma too cheaply (spreads too narrow / too close to ATM)

6. Max Drawdown and Recovery
Measure the largest drop of capital from a peak. Rule: if the drawdown is > 10%, cut size by 50% until you recover 50% of the drawdown.

Stress test - what kills an options portfolio

Run it once a month, on paper:

Test 1: -10% on SPY in 3 days (VIX +60%)
How much do you lose? Calculate: Delta + Gamma * move + Vega * IV change
Example: Delta +50, Gamma -10, Vega -150, SPY -10% = -50 USD, VIX 15->35 +20% IV
Loss ≈ Delta*Move + 0.5*Gamma*Move^2 + Vega*DeltaIV
If the loss is > 5% of the account, the position is too big on Gamma/Vega.

Test 2: IV Crush 30% on all positions
You gain if you are net short Vega. You lose if you are net long. Is the gain/loss < 3% of the account?

Test 3: No ability to roll (the broker doubles margin)
Do you have 50% of BP free? If not, which positions do you close first (ranking: worst EV first).

Test 4: Correlation 1.0
Assume that everything you hold goes the same way. Is the max loss of all spreads at once < 15% of the account?

If any test is over the limit, reduce.

The journal and process improvement

A portfolio journal != a trade journal.

Every month:

Credit spread win rate: target 60-70% (not 90% - 90% means spreads too narrow and a wipe is close)
Average win / Average loss = should be > 0.8 for credit spreads when closing at 50%
Profit Factor = Sum of wins / Sum of losses > 1.3
% of time BP <50% : target >80%
Time to 50% profit: on average 15-25 days for 45 DTE = efficient

When the plan says do not trade - at portfolio level

1. When used Buying Power is > 60% and you want to open a new position. You do not open. First close something that has reached 50% profit or cut a loser. BP is your survival limit.
2. When Portfolio Delta is > 2x the limit (e.g. +70 against a +30 limit). You are directional without having decided to be. Hedge it or close it.
3. When 3 positions are in the same sector and all are down. Those are not 3 independent bets, they are 1 bet x3. Close 2.
4. When VIX is +40% on the day and you are net short Gamma (-200) and net short Vega. Every 1% candle costs 2x the daily Theta. Cut size by 50% that day, do not add.
5. When you have not kept the journal for 2 weeks, but you are opening new positions. That is gambling. The journal is your risk manager. Without it, stop trading.

Mistakes that cost the most at portfolio level

Measurable exercise

Title: Run a portfolio for 60 days - process, not P&L

1. Open a paper account with 10k USD. Build a portfolio according to the 40/30/20/10 allocation from this lesson. Max 5 positions.
2. Every day (15 min) record: Portfolio Delta, daily Theta, Vega, used BP, Total P&L, P&L vs SPY Buy&Hold.
3. Every week run the -10% Stress Test and record the result. If the loss is >5%, cut size.
4. After 60 days calculate: Average BP, Average Theta %, Win rate, Profit Factor, Max Drawdown, Time spent, How many times you broke a limit.

Pass criterion: 60 journal entries + 8 stress tests + 1 A4 page of conclusions: what to improve in the allocation and the limits. Profit/loss is irrelevant, the process is what matters.

Check yourself

1. Capital 10k, used BP 6,500. Can you open a new 5 USD spread for 400 margin? Why not?
2. Portfolio Delta +80, limit +30. Give 2 ways to get down to the limit without closing all positions.
3. What is Profit Factor and why is it more important than the win rate for credit spreads?
4. Describe the -10% SPY stress test for a portfolio with Delta +40, Gamma -15, Vega -100.
5. Why is a 40/30/20/10 allocation safer than 100% Iron Condor?

Frequently asked questions

How many positions in a portfolio to start with? 1-3 positions, not 10. 1x Bull Put Spread 30-45 DTE, 1x Wheel on an ETF, 1x cash. Learn to manage 3 before you open 8. More positions mean more Gamma and more time.

Do I need portfolio software? Platforms (TOS, Tasty, IBKR) show portfolio Delta/Theta/Vega/BP. You only need a spreadsheet for the journal and the stress test. You do not need paid software to start.

Does an options portfolio work on the Warsaw Stock Exchange (GPW)? Yes, but simplified: 1-2 W20 spreads + the rest in ETFs/stocks. Liquidity limits the number of positions. 3-4 spreads is the maximum on the Warsaw Stock Exchange (GPW) at a reasonable slippage.

When to increase size? Only when for 3 months: Profit Factor >1.3, Max Drawdown <10%, BP <50% 80% of the time, and the journal is kept every day. Size is a reward for the process, not for 1 good month.

What if I only want 1% income a month? 1% a month is 12.7% a year. With credit spreads and a max loss of 2% per trade, you need a 65% win rate and an average loss < 1.5x the average win. That is realistic, but not without drawdowns of -5 to -10%. If someone promises 1% a month without losses, they are not measuring risk.

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Educational material. This is not investment advice or a recommendation. Every trading decision is your risk. A portfolio survives thanks to limits, not thanks to forecasting.

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