risk
Portfolio Delta
The net directional exposure of your entire portfolio. Positive = bullish, negative = bearish, zero = neutral.
Formula
Portfolio Δ = Σ (Δᵢ × Quantityᵢ × 100)
Variables
- Portfolio Δ
- Total equivalent shares of directional exposure
- Δᵢ
- Delta of each position
- Quantityᵢ
- Number of contracts (negative if short)
- 100
- Shares per option contract
Worked Example
Inputs
- Position 1
- +5 × 0.40Δ calls
- Position 2
- -3 × -0.30Δ puts (short puts)
- Position 3
- +200 shares
Calculation Steps
- 1
Calls: 5 × 0.40 × 100 = +200 share-equivalents - 2
Short puts: -3 × (-0.30) × 100 = +90 share-equivalents - 3
Stock: +200 share-equivalents - 4
Total = 200 + 90 + 200 = +490
Result: Portfolio Delta = +490 — equivalent to being long 490 shares
Intuition
Most retail traders unknowingly have very correlated positions (all bullish tech). If SPY drops 5%, your entire portfolio suffers. Track your portfolio delta daily and neutralize if it grows too large relative to account size.