The long gamma road

[nitro]

...
For Nitro, exploiting gamma only requires you to be exposed to it, be it with a single deep OTM option or a portfolio made of millions of complex calls, puts, expirations and strikes. It doesn't matter, if the final gamma of the portfolio is positive, we are long gamma. period.
...

Let me give you an analogy that might help. If I stand in the wind, I am "exposed" to it. This exposure can do all sorts of things like e.g. cool me off on a hot day. But it is very limiting. The wind controls me, not the other way around.

On the other hand, if I have wings like a bird or a plane, I can do something with the wind. I can fly. I can now use the power of the wind as a tool. And from the vantage point, I have lifted off a two dimensional world and made my world three dimensional. That is what having two ore more options does to a portfolio [a general statement but I am assuming the person knows how to design such a portfolio].

Of course, your danger has increased as well. You might crash from a great height and die. With great power comes great responsibility. But in the hands of an Peregrine Falcon or a fighter pilot, the extra degree of freedom is welcome.

FWIW.

 

[blueplayer]

Let me give you an analogy that might help. If I stand in the wind, I am "exposed" to it. This exposure can do all sorts of things like e.g. cool me off on a hot day. But it is very limiting. The wind controls me, not the other way around.

On the other hand, if I have wings like a bird or a plane, I can do something with the wind. I can fly. I can now use the power of the wind as a tool. And from the vantage point, I have lifted off a two dimensional world and made my world three dimensional. That is what having two ore more options does to a portfolio [a general statement but I am assuming the person knows how to design such a portfolio].

Of course, your danger has increased as well. You might crash from a great height and die. With great power comes great responsibility. But in the hands of an Peregrine Falcon or a fighter pilot, the extra degree of freedom is welcome.

FWIW.

Interesting analogy, although it doesn't change the fact that the trade did exactly what I wanted it to do. Namely, I wanted a directional trade with a risk reward > 3 for a move in the underlying of about 0.8% in a window of 24 hours (that it failed is a completely different matter).

More power to you if your trading style calls for a complex portfolio in order to achieve your goals, but clearly for the purpose of this journal, that lonely option was enough.

 

[blueplayer]

A new trade that looks exactly like the old one. This time the correct expiration

long 5 SPX Apr08 2095 Call

I entered at 1.45 at 12:06:52

This trade will last at most 24 hours. Size is half because I don't want to spend any meaningful money testing this pricing/optimization engine (considering I already spent 100 on it on my failed trade).

 

[blueplayer]

A new trade that looks exactly like the old one. This time the correct expiration

long 5 SPX Apr08 2095 Call

I entered at 1.45 at 12:06:52

This trade will last at most 24 hours. Size is half because I don't want to spend any meaningful money testing this pricing/optimization engine (considering I already spent 100 on it on my failed trade).

Well even though I don't remember at what level I closed this trade. It is safe to assume that it was a total loss (even more because I never posted an exit for it).

Those two directional trades were basically to test something I was doing and my luck had it that I got the direction wrong on each of them. Although the market did move down by more than was implied.

I just came back from a long vacation so I will reuse this journal for other long gamma trades that don't involve a lonely option.