Beta Weighting Bots & Positions

I’m so excited to share that the new platform release includes multiple updates that give us more control than ever to manage our bot portfolio. The most powerful addition may be the ability to reference your bot’s and position’s beta weight.

All options traders should leverage this tool in my opinion. The problem is, it was difficult to know how our portfolio's market exposure. Now it’s incredibly easy to find this information directly inside your Bots and Positions tabs.

We can see each individual position’s beta weight as well as the aggregate beta weight of all positions in our bots. We have the power to look at the beta weight of a single bot, multiple bots, and all open positions for a portfolio-level view of all active trades.

You can even select a DTE range to see metrics specific to the days selected. This way you can assess your portfolio’s beta weight, delta, open P/L, total risk, and more across different time frames.

In options trading, beta-weighting is a portfolio management tool that allows an investor to evaluate their portfolio to a benchmark. Traders use Beta to measure volatility relative to SPY (S&P 500) and calculate Beta-Weighted Delta for each position in a portfolio.

Beta gauges how a security's volatility compares to SPY, with values over 1 indicating higher responsiveness or sensitivity relative to price movement in SPY. For example, a beta weight of 80 suggests that for every $1 move up in SPY, your portfolio’s value will increase by $80, implying that your portfolio is quite bullish. You could then dive deeper into your bots to see what position or positions are specifically impacting your beta weight.

Beta weighting can help inform our decision-making when adding new positions. Plus, we can now check a new position’s beta weight in Trade Ideas to help better understand how the position will impact our portfolio.

The options Greek delta measures a position's directional exposure. Beta Weighting adjusts individual Deltas based on the underlying securities' volatility relative to SPY, creating a standardized metric for assessing overall directional risk.

Beta-Weighted Delta to SPY provides a unified measure of directional exposure, aiding in portfolio risk analysis. Instead of summing individual Deltas, it considers each position's volatility risk. The resulting Beta-Weighted Delta indicates how the portfolio's P/L responds to market or benchmark changes, effectively representing the equivalent number of owned shares in SPY.

Traders can estimate daily P/L changes using Beta-Weighted Delta, enhancing risk management. This technique allows for maintaining a delta-neutral or slightly directional portfolio by balancing positive and negative Beta-Weighted Deltas.

Calculation:

‍Beta Weight = Delta * Beta * (Underlying Last / SPY Last) * Quantity

where:
‍
‍Delta = Option position's net delta of individual legs
‍Beta = Underlying security's beta to S&P 500 indexUnderlying
‍Last = Last price of the option position's underlying security
‍SPY Last = Last price of the SPY ETF
‍Quantity = Contract quantity of the position