Option Gamma Trading (Volcube Advanced Options Trading Guides) by Gleadall Simon

Author:Gleadall, Simon [Gleadall, Simon]
Language: eng
Format: epub, mobi
Publisher: Volcube
Published: 2014-02-01T23:00:00+00:00

Some traders like to analyse the break-even points (as discussed in Section 3) and use this as the basis for gamma hedging levels. For example a long gamma player may think that if he can achieve a gamma hedge at the break-even point early in the session, any subsequent gamma hedges will be pure profit. A short gamma player may remember the rule that a gamma hedge half as far away as another, only generates ¼ of the profit/loss. So the short gamma player may decide to short gamma hedge half way towards either break-even point and the same distance thereafter in any direction. He knows that he can stomach four such negative gamma hedges before he will incur losses greater the theta he intends to collect on his short options overnight.

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