Gamma Scalping: How To Profit From Options In This Wild Market
A great way for options traders to generate consistent income in extremely volatile markets (like the market we are experiencing right now) is called Gamma Scalping. When the underlying market/instrument is making big moves and swinging wildly, this is a strategy that thrives, unlike traditional monthly income strategies such as iron condors, calendars, credit spreads, etc.
Gamma scalping allows a trader to set up a trade that can make a profit if the market moves in any direction, and then immediately lock in that profit and ‘set’ the position for profit once more if the stock moves in any direction. . Think of gamma scalping as a way to day trade without having to choose direction, eliminating most of the risks normally associated with day trading.
When gamma scalping, the trader does not care which way the market goes. Trading is set up to make a profit either way. Up or down, all is well. The market just needs to move, and the bigger the moves, the better.
Then, when a move has occurred and a profit has been taken on the position, using an easy-to-follow set of rules, the trader can make an adjustment that immediately locks in that profit while setting up the position to take profit again regardless of whether the the market goes up or down. And this can be done over and over again, continually removing the profits from the trade.
How many times have you bought a stock or option and ended up being right and seeing some gains, only to have the underlying immediately turn around and roll back to your starting position wiping out all the gains?
Gamma Scalping can remove this. When profits are made, gamma scalping allows you to capture them forever. And if the underlying continues to move, or returns to where it started, MORE gains can follow.
Gamma scalping is a great tool to have in the stock and options traders toolbox and especially in these extremely volatile times, this strategy can be a real asset in helping to generate large profits.
And on top of all that, it’s also a really fun way to trade.