Bull Put Spread Greeks Are the Sum of Each Leg’s Exposures

Summary

The document asks how to summarize implied volatility and Greeks for a bull put spread, formed by buying a lower-strike put and selling a higher-strike put. It considers averaging each metric across the legs versus taking the long leg’s value minus the short leg’s value.

The answer clarifies that the position’s delta, gamma, theta, and vega are obtained by adding the signed exposures of the two options, so the short leg contributes with its position sign. Implied volatilities do not combine linearly into a single spread volatility. Instead, a trader can form a volatility view and compare it with realized volatility or market expectations. The post questions the purpose of assigning one implied volatility to the structure and gives no worked example, pricing method, or discussion of how skew and changing exposures affect the spread.

Key ideas

• A spread’s Greek exposures are calculated by summing each leg’s Greeks with the position signs applied.
• Averaging the two legs’ Greeks does not represent the position’s net exposure.
• Implied volatilities from separate options cannot be linearly combined into a spread implied volatility.
• A trader can compare a personal volatility forecast with realized volatility or market expectations.
• The post does not provide a numerical example or a method for modeling volatility skew.

Tags

# How to calculate implied volatility and greeks in Bull Put Spread option strategy?


# How to calculate implied volatility and greeks in Bull Put Spread option strategy?












Ok, obviously I am buying lower strike put and selling higher strike put. What is the recommended volatility and greeks to consider in my trade?

Volatility:

- Average volatility between both legs?

- Long volatility minus short volatility

Delta/gamma/theta/vega:

- Average Delta/gamma/theta/vega between both legs?

- Long Delta/gamma/theta/vega minus short Delta/gamma/theta/vega?

I think option one for volatility and option two for greeks. Any thoughts?

## Answer by Matt Wolf (score 3, accepted)

https://quant.stackexchange.com/a/7183

The delta, gamma, theta and vega exposure is just the sum of the individual positions, thus you sum up the greeks of your two puts, simple as that.

Regarding implied volatility you cannot just average implied vols and say this is the implied vol of my structure (multi asset position). You can assign your own volatility expectations and compare that with its historical realized volatility or compare with the expectation other market participants have (many spreads are listed, this one I dont think so), but you can't in a linear fashion combine implied volatility figures. Why would you want the implied volatility of the structure anyway?

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.