I was told to increase size if I was comfortable with doing so in special situations. I traded a 750k debit when the account was at a one mil gain. I've doubled the account since inception of the journal. I'll increase the hedge proportion in-line with the gamma curvature -- so it will go to 100lots above '700.
I trying to learn from this thread. I know a little (real little) about Gamma. So when you say Fat Gamma. You are refferring to selling options that are overpriced? Please define Fat Gamma for a newbie. I know that negative gamma means writing insurance (lucrative business IMO) and positive gamma when buying options. I also know that the Gamma measures the rate of change of the Delta. So what is Fat gamma? Are you reffering to Gamma Scalping? (sorry if the question seems dumb---I am looking at options more as a new years resolution. I usually trade outright futures) thanks
Yes, I know that: the odds are terrible, u would have to risk 80/90 to get 20/10. Sometimes though it can be done on daily bets close to expiry if the underlying is usually volatile (better odds) but has very low probability of reaching the barrier.
Not at all. Fat gamma relates to the higher expense the long gamma trader needs to pay as a function of increased volatility. Since these 7d bets are priced from stat-vol we call them gamma/vega trades. Selling fat gamma relates to a higher volatility, but these are gamma-dependent rather than vol-trades in terms of vega-sensitivity. Gamma becomes less sensitive to spot if vols increase, so it's said to trade "fat" ... other lingo would include fat sigma -- the debit trades inversely with vols, so the greater the vol/gamma risk, the smaller the debit requirement. My limit for this Nikkei trade was 65% of payout, so it's well within those parameters.
Yeah, I am still short, but traded a close, single no touch under the market. Long Nikkei futures, but the gain in yen will hurt the Nikkei.
Correct, but more concerned with direction/fx translation. I can fund these in any currency, but it's held in JPY, thankfully.
In a more general vein and not related to this particular trade, I have always found the currency risk to be a real disincentive against intraday trading of overseas markets.