As you know, the P/L from a gamma scalp is 0.5*gamma*S^2 (where S is spot movement). However isn't delta affected by other factors such as Vanna, thus isn't the formula useless for predicting P/L per scalp (because it only takes gamma into account)?
Alright thanks Dont have any proof, it's a formula I picked up on the NP forums. I've seen it used elsewhere as well so I just assume its correct.
The delta component would be small. The mtm component dVega/dSpot can put you in sufficient amount of pain, but I assume you are calculating as if you are holding it to expiry.
NucPhy (Nuclear Phynance)... And yes, the formula is a correct quick 'n dirty one, but, like all such formulae, it's an approximation. It's obtained simply from the Taylor series expansion, by discarding higher-order terms, because they're assumed to be less significant.
but even that would generally be small compared to dC/dsigma unless you were hedge in vega. Assuming you don't have something crazy convex or a huge move in vol.
What I'm looking for is basically a way to calculate P/L per scalp when you're long gamma and continuously hedging delta. As far as I understood, 0.5*gamma*S^2 is ~accurate, but I fear there are other factors at play that may influence my P/L per scalp, so my question is what would these other values be? I understand vanna is negligible...and I disregard any IV movement as I hold until expiry.