By the FinLingo Team | Capital markets practitioner, front office experience at a major European investment bank. FinLingo covers 342 lessons from bonds to exotic derivatives. About · Last updated:
Options trading interviews are the most Greeks-intensive in finance. You need to think in delta, gamma, vega, and theta simultaneously and compute P&L impacts on the fly. Here are the questions that desks actually ask.
"What happens to vega as an option approaches expiry?" Vega decreases. Longer-dated options are more sensitive to vol because there is more time for volatility to affect the outcome. As time shrinks, the option's sensitivity to vol drops. At expiry, vega is zero — vol is irrelevant because there is no time left for moves to materialise.
"You are long a call with delta 0.4, gamma 0.03, and vega 0.12. The stock rises $3 and vol drops 2 points. What is your P&L?" Delta P&L: 0.4 × $3 = $1.20. Gamma adjustment: 0.5 × 0.03 × 3² = $0.135. Vega P&L: 0.12 × (−2) = −$0.24. Total ≈ $1.20 + $0.135 − $0.24 = $1.095 per share. The interviewer wants to see you handle delta + gamma + vega simultaneously.
"Implied vol is at 30%. You think realised will be 22%. How do you trade this?" Sell options (short vega, short gamma). Delta-hedge to remove directional exposure. If realised vol comes in at 22%, your hedging costs (gamma) are lower than the premium you collected (priced at 30% vol). Expected P&L ≈ vega × (30% − 22%) = vega × 8 points. But path matters — a single large move can wipe out weeks of theta collection.
"Is high implied vol always overpriced?" No. If an earnings announcement is expected to move the stock 10%, and IV reflects an 8% expected move, the option is actually cheap despite high IV. "Overpriced" means IV exceeds what vol actually turns out to be — something you only know in hindsight.
"You are short 500 ATM straddles. The stock gaps up 8% overnight. Describe your risk." Your short calls are now ITM. Delta has jumped from ~0 (straddle neutral) to significantly positive. Gamma loss on the gap: 0.5 × Γ × (8%)² per straddle, multiplied by 500. You need to sell shares immediately to re-hedge, at a worse price. Meanwhile, if IV spiked on the gap, your short vega position is also underwater.
You need to compute P&L from multiple Greeks simultaneously: delta times stock move, plus half gamma times move squared, plus vega times vol change, minus theta. You should know how each Greek behaves near expiry, at different moneyness levels, and how they interact. Mental math speed matters as much as conceptual understanding.
Practice computing Greeks P&L mentally: if delta is 0.5, gamma is 0.04, and the stock moves $2, what is the total P&L? Time yourself. Then practice vol trading scenarios: if you sell at 25 vol and realise 20, estimate your profit. Use FinLingo Lab vanilla pricer to build intuition for how Greeks change with inputs.
The relationship between realised and implied volatility. Every options P&L ultimately depends on whether the stock moves more or less than the market expected. Gamma scalping, theta collection, vega exposure, are all different facets of this one concept. If you deeply understand realised vs implied vol, you can reason through any options trading question.
FinLingo covers the Greeks and volatility trading in Level 3 — 17 units with interactive charts and a real-time pricer. Level 1 is free.
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