ok... ok...
SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
If not negative gamma scalping, perhaps you'd prefer the terminology: "theta scalping."
Delta-neutral "theta scalping" entails losing money on the scalps in exchange for gaining decay on the position. Money is made if implied is greater than realized vol at expiration i.e. the opposite of what most would understand to be gamma scalping.
Ipso facto, I concur with your assessment that tplast appears to be doing neither
If he's making money then I'm sure he doesn't care what it's called. Opportunistic delta hedging of sorts.
Good dialogue.
MoMoney.
Quote from momoneythansens:
If not negative gamma scalping, perhaps you'd prefer the terminology: "theta scalping."
Delta-neutral "theta scalping" entails losing money on the scalps in exchange for gaining decay on the position. Money is made if implied is greater than realized vol at expiration i.e. the opposite of what most would understand to be gamma scalping.
On Index ? Not such a good idea because of opening gaps. Large hedging interval via spot to adjust delta/protect short strikes and then whipsaw affect.
Repeat the above in loop.
IMO , but many will probably disagree.
Gamma trading is opportunistic. Not to say it's a slam-dunk. Locking gains from gamma does nothing to isolate vega nor the convexity on theta. Your earnings from scalps must increase with time under static vols. Not to mention missing a lock by ticks. Successful gamma-trading is an art form.
Hedging vanilla short-g/d with spot adds risk, period. Trading spot into short gamma risk to earn theta "scalps" would be insanity if the intent is to maintain something close to delta-neutrality. Net position risk [spot + option] would be an order of mag > the realized theta, assuming static-vols.
Hedging vanilla short-g/d with spot adds risk, period. Trading spot into short gamma risk to earn theta "scalps" would be insanity if the intent is to maintain something close to delta-neutrality. Net position risk [spot + option] would be an order of mag > the realized theta, assuming static-vols.
I was hardly recommending it LOL. Just explaining the concept that there is an opposite to long gamma scalping (there appeared to be some disagreement on this topic).
I offer no opinion on the merits or efficacy of employing such a strategy.
Because of negatve gamma, when you sold your futures, you were already short deltas. Selling just made you shorter. That's doubling the risk.
If you were really 'scalping negative gamma' you would have bought even more futures (to get delta neutral again), not sold the ones you bought earlier.
Short gamma scalping you buy rallies and sell dips.
That's not what you did.
Your 22 spreads may have been the driving force behind the futures purchase, but they had nothing to do with the sale. You just decided to get even shorter and arbitrarily assign the profits from the futures trade to your 22 spreads.
Mark
can someone please tell me how the DJIA is at it's 2nd highest level EVER!? And how SPX and the others continue to rise? Last time I checked, there weren't a ton of yahoo.com and msft and drkoops.com and petstore.com's around going all nuts on the market and I dont see secretaries and janitors becoming paper millionaires working for tech companies.
all I see is how the economy sucks and everyone's homes are getting foreclosed on and those that want to sell their houses have to beg buyers to check their digs out.
Is paying 50 cents less at the pump and not seeing a rate hike really the equivalent to the beautiful days of irrational exuberance of the late 90's??
all I see is how the economy sucks and everyone's homes are getting foreclosed on and those that want to sell their houses have to beg buyers to check their digs out.
Is paying 50 cents less at the pump and not seeing a rate hike really the equivalent to the beautiful days of irrational exuberance of the late 90's??