How Can a Trader Use a Gamma Scalping Strategy?
Gamma scalping is a strategy where a trader attempts to profit from an option's high Gamma while maintaining a Delta-neutral position. The trader buys options (long Gamma) and continuously re-hedges the Delta by trading the underlying asset.
When the underlying price moves up, the trader sells the underlying; when it moves down, they buy it. The profit comes from buying low and selling high on the underlying asset, financed by the option's premium.
Glossar
Gamma Scalping Strategy
Strategy ⎊ Gamma scalping, within cryptocurrency derivatives, represents a high-frequency trading approach capitalizing on fleeting shifts in option pricing driven by gamma exposure.
Gamma Scalping
Exploitation ⎊ Gamma scalping, within cryptocurrency options and derivatives, represents a high-frequency trading strategy predicated on capitalizing on the rate of change in an option’s delta, specifically exploiting the gamma risk inherent in market maker hedging activities.
Scalping
Momentum ⎊ The practice of scalping, within cryptocurrency, options, and derivatives markets, centers on exploiting fleeting price discrepancies arising from high-frequency trading and order flow imbalances.