Go High Gamma

Hello there!

What are the implications of being high is Gamma:

• Options are near the money
• Time to expiration may be low
• At the money option near expiration has a high level of gamma

When maintaining a high gamma position you should be vary of the effects of

• Theta - the decay of your portfolio value. This would be paramount if the option are near the money.
• Time to expiration would be low, thus the implied volatility would be high

Of course any hedging error would be favourable therefore delta instability or the instability of the delta hedge will not count. Where as if it is negative Gamma it would be unfavourable.

 

Thanking you.

Best regards,

Suminda Sirinath Salpitikorala Dharmasena B.Sc. (Hon.) Comp. & I.S., Lon.

The intuitive mind is a sacred gift and the rational mind is a faithful servant. We have created a society that honours the servant and has forgotten the gift. - Albert Einstein