Scalping question

Discussion in 'Options' started by TheoHornsby, Feb 11, 2011.

  1. Gamma scalping Feb 90 puts against long $90 stock. goes up, I sell shares, down, I buy. Get more delta - or + intraday to work intraday trend. Works fine for 2+ weeks. Lots of zig zags, getting ahead slowly. Drops to 85, roll the 90 puts down to 85, taking ITM gain (paper loss on stock).

    stock rallies to 93 with little fluctuation so just selling shares. Don't have many shares left and puts almost worthless. Stock drops. Near 90 sell some Feb 90 put and some more at 89 and 88 creating verticals but more 85s than 90s. No problem so far.

    Feb 85puts have value again (25-35 cts). Decide to continue into next month so salvage Feb 85 put value with roll to Mar 85. Now have Feb 90/Mar 85put diags with a few long shares and extra Feb 85puts.

    Here's the question. The short Feb 90 puts have a delta of about +60 but next Friday they turn into long shares with delta of 100. At what point do I take that diferential into consideration adjust my delta? Do I keep scalping at present delta and shift toward the expected post assignment delta late next week? Or ignore that because the stk could rally past 90, Feb 90puts expire and it's a non event? Thanks.