Options risk management is the practice of measuring and controlling the risks of an options position or a whole book of options. It differs from the management of share portfolios because an option's exposure is not fixed. Its sensitivity to the underlying changes as the price moves, as time passes and as volatility shifts.
The first tool is the set of option Greeks, added up across all positions. Desks set limits on net delta, gamma and vega, and remove unwanted directional exposure by delta hedging. Because the Greeks hold only for small changes, they are backed by scenario tests that reprice the book under large moves in price and volatility together. Other elements are limits on position size and concentration, the use of spreads with a defined maximum loss, margin held against short options, and attention to early assignment and to liquidity. Firms automate these checks in a risk management system.