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How exactly are you scalping gamma by buying calls 24 hours before expiration?


I’m not really sure what you mean. If I buy 10 lots of ATM 0dte puts, and 5 lots of underlying, I will have a delta neutral position. If the market moves up, my put delta will be less than 50 due to gamma, so I am now net long. So I sell some underlying for a small profit which takes me back to delta neutral. Then the market moves back down again, and my put delta increases leaving me net short (again due to gamma). So I buy some underlying to keep me delta neutral. This is called gamma scalping.

In the above, I’ve just realized a small profit by trading the underlying and a small bit of theta burn. As long as the former is greater than the latter (as long as realized vol > implied vol) I make money.

Rinse and repeat this process over and over again.




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