| Fra Nomura: |
| Lot of short gamma is expiring on Friday. After Friday the destabilization effect becomes much smaller. According to Nomura’s McElligott, these are the statistics: SPX / SPY expecting 42% of $Gamma to expire Friday QQQ expecting 56% of $Gamma to expire Friday IWM expecting 57% of $Gamma to expire Friday HYG expecting 46% of $Gamma to expire Friday |
Fra Sportgamma: – hold øje med en stribekurs på 3700 ved udløb fredag.
Fra M ear:
Gamma is the second order of an option, the delta of the delta. Yes, but explain gamma and the effects of hedging it to a kid. The quick version:
Assume you are long the 100 strike in a stock and we are trading at the last day of the option expiring. The stock is trading at 95 and suddenly jumps to 105. The option has gone from practically worthless to being worth $5. What do you do? You sell the corresponding amount of shares vs your calls and you are now “flat delta” (if stock goes higher from here, your long call will increase by the same amount as your short stock, p/l effect is zero). Then assume the stock falls suddenly back to 95 again. Your call is once again worthless, but you sold short shares at 105. You buy those back and you have made a $10 profit per share. You are once again flat here and own a worthless call again. Assume the stock moves higher again and is suddenly back to trading at $105. Your call option is worth $5 again. What do you do? Sell the corresponding amount of shares at 105 and you are flat delta risk again. Assume the same thing happens once more; the stock falls to 95. Your call options is worthless for the second time, but you made another $10 per share as you cover the short sale. You get the point. This is the most “extreme” form of gamma trading.
