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Reversegammascalping

Full ARKK Reverse Gamma Scalping PositionThe basic essence of reverse gamma scalping is to do additive and subtractive delta adjustments over time to keep delta fairly neutral so that theta can do its dirty work. Shown here is my full ARKK position that started as a delta neutral iron condor to which (a) I layered in an additional iron condor as a delta adjustment trade; (b) mixed and matched profitable put side with profitable call side to reduce units and/or risk; and (c) did an additive long delta short put vertical as a delta adjustment. Rather than continue showing each of these additive/subtractive delta adjustments as separate trades, I'm setting out the full banana here. I've collected a net 3.22 in credits on a buying power effect of 11.78, and the position has a delta/theta ratio of -2.09/6.00. With 36 days to go, I'll primarily look at doing profitable subtractive adjustments first; then additive ones.
CBOE:ARKK
by NaughtyPines
Opening (Margin): /MCL March 16th 78 Short Straddle... for a 7.10 credit. Comments: I still have a little bit of time in this cycle (35 DTE) to putz around with reverse gamma scalping /MCL, so putting on a fresh short straddle at the 78 strike for the starter position. Will generally look to make additive adjustments to keep the delta/theta ratio <1.0 right up until 21 DTE, at which time I'll take the whole pile of pasta off. Current break evens for the setup are 70.90 on the put side, 85.10 on the call. 7.10 credit on buying power effect of 9.88, 71.8% return on capital as a function of buying power at max, 18.0% at 25% max.* * -- Generally, I look to take profit on short straddles at 25% of max.
NYMEX:MCL1!
by NaughtyPines
2
Opening (Margin): /MES March 17th 4075 Short Straddle... for a 199.75 credit. Comments: 199.75 credit (998.75 max) on buying power effect of 1038.55; 96.2% ROC at max; 24.0% at 25% max.* A different form of a reverse gamma scalping setup using short straddles. In this case, delta adjustments are made using additive skewed short straddles to delta balance. For example, if the position skews out to -20 short delta, you sell a slightly skewed long delta short strangle to delta balance. I'm intending to leave the entire position on (the original plus any skewed straddle adjustments) running into no later than about half way into the cycle (21 DTE), but will pull the entire thing off in profit earlier if I get an opportunity to do so. An example of a short straddle that is skewed long delta: March 17th 4140 short straddle, +19 delta (put deeper in-the-money than the call). An example of a short straddle that is skewed short: March 17th 4020 short straddle, -20 delta (call deeper in-the-money than the put). * -- With short straddles, I generally look to take profit at 25% max, since these have less room to be wrong than a short strangle. Most at-the-money short straddles set up with expected move break evens, which is less room to be wrong than I would ordinarily set up with a short strangle, where I generally set up sides at 2 x the expected move.
CME_MINI:MES1!
by NaughtyPines
2
Opening (Margin): /MCL March 16th 79.25 Short Straddle... for a 9.19 credit. Comments: A short delta additive adjustment trade here to cut net long delta in my entire /MCL position by about half, with the goal being to keep the delta/theta ratio under 1.0. The entire position still leans net long, but I will leave it that way to see if the market does some of the lifting for me. Total credits collected of 13.90. As with my /MES reverse gamma scalping setup, looking to take about 25% of total credits received out of the position, closing it out in its entirety at no later than about half way through the cycle (i.e., around 21 DTE) before moving on to the next monthly. For those of you just tuning in: This is not a standalone trade. It is an adjustment to an existing position with delta/theta metrics peculiar to that position. Unless you have that exact same position on with the exact same delta/theta metrics, this trade will only be informational or educational as to how to make an additive delta adjustment to a position you currently have on, particularly using a skewed short straddle to accomplish the task. I would note that this isn't the only way in which to adjust position net delta; it is just the tool I am using in this particular case. The entire position is also nondirectional by nature with the sole effort being to keep the net position's zero delta/gamma point within shouting distance of current price with various delta adjustments, some of which will be additive (adding contracts), some of which will be subtractive (closing out contracts). I have no opinion as to where oil goes from here or how much it will move in any given day or over a given time frame or whether a particular level is important or not for price action purposes. This type of setup is basically a bet that the underlying stays within the expected move (EM) or some factor of the expected move as determined by options delta and little else.
NYMEX:MCL1!
by NaughtyPines
Opening (Margin): /MES February 28th 4080 Short Put... for a 73.75 credit. Comments: Functionally rolling to a 4080 short straddle here to delta balance and bring my delta/theta ratio to back under 1.0. The position remains net delta short, which I'm fine with since we're at 30 day highs here. Will look to take off the whole kit and caboodle in the next several days here, since I've only got 32 DTE to go in this contract, and would like to move on to the March fairly soon.
CME_MINI:MES1!Long
by NaughtyPines
Opening (Margin): /MES February 28th 4000, 4010, 4040 Short PutsComments: Replacing the short puts I took off in profit to delta balance. Opened the 4000 for a 56.00 credit. Opened the 4010 for a 59.00 credit. Opened the 4040 for a 70.75 credit. Net delta of the position leans net short, but delta < theta, so I'm fine with the position remaining slightly short for now. The basic notion here is to make delta adjustments for realized gains at intervals to keep delta < theta, peeling off oppositional sides in profit where possible or the whole she-bang at once, so long as total realized gains exceed unrealized losses (which is the current case with what I have on now).
CME_MINI:MES1!
by NaughtyPines
Opened: NVDA August 19th 175 Short Call.. for a 2.76 credit. Comments: (Late Post). Wasn't fully satisfied with the delta/theta metrics of this position on Friday, so added another short call in the August monthly, bringing total credits collected to 20.26. The resulting setup's delta/theta is now 4.40/34.15 with 15.13 of extrinsic (as of Friday close). With earnings in 45 days, I'm basically going to attempt to reverse gamma scalp my way out of the position by using options to delta balance while the extrinsic bleeds out of the position. The basic goal here (as it is with gamma scalping) is to do adjustment trades at delta intervals to keep the setup fairly delta neutral to allow theta to do its "magic." As a general matter, I don't like doing this type of thing a ton, since it can be buying power heavy, but don't have a ton going on in the margin at the moment, so am looking at it as a little engagement trade. (I also would like to just exit the position, since I've been thrashing around on it for several cycles already).
NASDAQ:NVDA
by NaughtyPines