Losing Money With Options : Advanced Techniques (Volcube Advanced Options Trading Guides Book 6) by Simon Gleadall

Author:Simon Gleadall [Gleadall, Simon]
Language: eng
Format: epub, mobi
Publisher: Volcube
Published: 2014-12-18T00:00:00+00:00

This scenario is fairly common. The option trader did a couple of things that were, and not only in hindsight, not particularly clever. The result has been that he missed his long gamma hedge completely and he has foregone scalping profits. Silly thing number 1 was to ignore the technical support level which was well-broadcast. Had he moved his gamma hedge up to say $100.02 (and slightly reduced the quantity bought, since he would not have been as short delta at this price), he would probably have had a disproportionately better chance of a happier outcome. If the support level does indeed prove a sticking point for the underlying, then it may well make sense to move the gamma hedge slightly north of the support level (or south of a resistance level) to increase the chances of a fill. The second silly thing, on the surface at least, was to work $100.00 which in purely psychological terms is likely to form its own technical level. For superstitious reasons or others, prices such as “100.00” or “3000” in an index, often seem to form technical levels. To the author’s knowledge, no study has been performed to confirm or refute this being the case, but for the sake of a tick, it hardly seems worth the risk.

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