Gamma Scalping
What It Is
Gamma scalping is an advanced options strategy where traders adjust delta‑neutral positions to profit from price fluctuations while holding positive gamma.
Why It Matters
It allows traders to capture gains from volatility without needing to predict direction.
How It Works
- Start with a delta‑neutral, long‑gamma position (often long straddles or strangles)
- As price moves, delta changes
- Trader buys low and sells high to rebalance
- Profits come from repeated adjustments
Key Components
- Delta adjustments
- Positive gamma
- Frequent rebalancing
- Volatility sensitivity
Example
A trader long a straddle buys shares when price drops and sells when price rises, capturing small profits repeatedly.
Key Takeaways
- Gamma scalping monetizes volatility.
- Requires active management.
- Works best in choppy, high‑movement markets.