I don't believe you can earn a profit by gamma scalping with negative gamma. With neg gamma, you buy rallies and sell dips to neutralize delta risk. Mark
Yes, it probably be very difficult to earn a profit but the goal is to raised the b/e. I've risen mine from 1340.5 to 1343.8.
RR, I`m not bullish, this just covers part of equity drop in case of another upside move. Otherwise I would never touch puts now. My position is quite complex since I have long ES and free bear put vert 1320/1335, so going down would benefit me too much which means I am unbalanced. This way I am adjusting it.
got it Chris...thanks.. well I haven't gotten filled and with the market going down probably won't..just a thought
OK. But you are NOT scalping your position. You are opening new positions, in addition to your current position. Then you are taking a profit and closing the new position. You could do that with or without the original posiiton - thus, you are not 'scalping your position.' What you are doing is doubling up your risk at point in time that you choose. You are free to keep your books any way you choose, but it is not reasonable to use any scalping profits - from an indepenedent, unrelated position- to reduce the b/e for an older position. Let's recognize we are way off topic here. Mark
I understand, and respect, your point but I don't see why the same arguments cannot be applied to long gamma scalping. I think the main difference in out points of view is in whether we prefer to manage our portfolio as a collection of individual trades or as an inventory of contracts.
For the risk you are taking by owning a position with negative gamma. Theta is your profit when the gamma doest hurt. But that has absolutely nothing to do with scalping negative gamma. You cannot scalp negative gamma. You can double up; you can go long or short any time you want; but it has nothing to do with neg gamma. Mark
When you have positive gamma and the underlying moves, your position accumulates LONG deltas (higher move) or short deltas (lower move). When you buy or sell some of the underlying to neutralize those deltas, you are scalping your gamma. The difference is: With long gamma, you are nuetralizing your risk when you buy dips or sell rallies. With negative gamma, you are doubling up on your risk when you buy dips and sell rallies. That's a very big difference. Mark
Not trying to be argumentative, but I think we are talking about 2 different things. The way I see it is long gamma scalping, you buy dips and sell rallies. Short gamma scalping you buy rallies and sell dips. A concrete example from today. I had -408 future equivalent deltas and bought 4 ES futures at 1345.5. This leaves me delta neutral, it doesn't double up my risk. I later sold at 1447.5 for a gain of 8 ES points, raising my b/e 0.36 on my 22 spreads.