Gamma Scalping with Reverse Iron Butterfly

How would you hedge your option scalps... or, are you looking to fade the moves with a a scalp???

Quote from acen1975:

try SPX:D
if i can scalp with options on every 6 to 8 ticks,so could you.....
when you start long term scalping position ,the most important is the liquidity vs daily range fluctuation.

the perfect liquidity is SPX,the best swings-oil futures......
even that the bid/ask spread in the oil ATM options is 2 times bigger,than the ATM SPX options ,right now the oil is the better choice(my opinoin)
the easiest way to compare underlines for scapling is to do something like a ration index between them.
if not recognized closely with different underlines-you can use the IV % difference ,vs cost of trade % difference in ATM options.
for me,the only underlines that make sense for gamma scalping are only ES mini and ECL....
gamma scalping on stocks=nonsense
More...
 
Quote from jones247:

lol... of course I would close out when/if the short wings are ITM. With them being several strikes away, this would have been a very profitable trade by the time one of the short wings go ITM...
More...
What's the definition of "very profitable"?

If you're gamma scalping, the stock portion is going to negate some of the gain on the long straddle component while you lose on the short legs. You know, that problem that IV_Trader mentioned about gamma scalping a non linear curve ?

And how does this jive with your previous comment?

>> ... remember that with gamma scalping the further the market price moves away from the strike price, the less profitable it becomes. Therefore, it's an inherently limiting strategy to begin with, as with all spread strategies. <<
 
Quote from jones247:

How would you hedge your option scalps... or, are you looking to fade the moves with a a scalp???
More...

the options,that you use for scalp are the actual hedges.
you can not build scalping position with a butterfly,because you dont have open legs on which to scalp.
your fly will get into high risk gamma play,instead of gamma scalp,because your scalps will be more short options,than long.

best scalping method to start is to buy 10 futures and buy 20 ATM puts.
on every 10 points move in spx you short ATM option,when it reverse-on every 10 point you close the shorts and cash in.
ATM option scalp with 50 delta will make you 250$ profit on a swing,take the cost of trade,and you will get between 150-200$ from each swing.
if you buy straddles,the initial investment is more costly,and the theta is a killer twice as much.
forget the fly-this is not a scalping strategy,its a directional play
 
I'm not sure how to calculate the outcome; however, I believe that the theta & negative IV loss avoided with both spreads would more than compensate for the gamma/delta loss associated with the short leg... If I'm fundamentally wrong, then I guess I'll go back to the drawing board of the traditional gamma scalping...

Quote from spindr0:

What's the definition of "very profitable"?

If you're gamma scalping, the stock portion is going to negate some of the gain on the long straddle component while you lose on the short legs. You know, that problem that IV_Trader mentioned about gamma scalping a non linear curve ?

And how does this jive with your previous comment?

>> ... remember that with gamma scalping the further the market price moves away from the strike price, the less profitable it becomes. Therefore, it's an inherently limiting strategy to begin with, as with all spread strategies. <<
More...
 
Quote from acen1975:

the options,that you use for scalp are the actual hedges.
you can not build scalping position with a butterfly,because you dont have open legs on which to scalp.
your fly will get into high risk gamma play,instead of gamma scalp,because your scalps will be more short options,than long.

best scalping method to start is to buy 10 futures and buy 20 ATM puts.
on every 10 points move in spx you short ATM option,when it reverse-on every 10 point you close the shorts and cash in.
ATM option scalp with 50 delta will make you 250$ profit on a swing,take the cost of trade,and you will get between 150-200$ from each swing.
if you buy straddles,the initial investment is more costly,and the theta is a killer twice as much.
forget the fly-this is not a scalping strategy,its a directional play
More...

buying the synthetic straddle is almost certainly no cheaper than the natural and has similar theta burn.
 
1.this is not a synthetic straddle

2.its 50% cheaper,because max loss is the primium of the options,your futures are 100% hedged-no need for margin r.
if you do straddle ,you buy 100% more options:D

3.how can you say that theta is the same,when with the straddle you have twice more long options?:confused:
 
Quote from jones247:



Gamma scalping...

Walt
More...

Walt, when gamma scalping works, it's magic

But if you sell and the stock moves higher and you sell some more and the stock moves higher and you sell some more...

You will not have any profits.

That's the gamma scalping story.

Market makers do it - not so much to make money - but more to minimize risk by remaining near neutral most of the time.

Mark
 
Quote from acen1975:

the options,that you use for scalp are the actual hedges.
you can not build scalping position with a butterfly,because you dont have open legs on which to scalp.
your fly will get into high risk gamma play,instead of gamma scalp,because your scalps will be more short options,than long.

best scalping method to start is to buy 10 futures and buy 20 ATM puts.
on every 10 points move in spx you short ATM option,when it reverse-on every 10 point you close the shorts and cash in.
ATM option scalp with 50 delta will make you 250$ profit on a swing,take the cost of trade,and you will get between 150-200$ from each swing.
if you buy straddles,the initial investment is more costly,and the theta is a killer twice as much.
forget the fly-this is not a scalping strategy,its a directional play
More...

You're aware that the long 10 futures/long 20 atm puts is a long synthetic 10-lot straddle?
 
You must log in or register to reply here.
Back
Top