Gamma Scalping

Technically yes, but CommSec's high commission (A$19.95 per trade) makes gamma scalping unprofitable. You need a low-cost broker like Interactive Brokers (A$6 per trade) for gamma scalping to work. Transaction costs are critical in this strategy.

Gamma scalping requires active monitoring during market hours. You should check delta at least every 30 minutes and be ready to execute hedges. It's not suitable for those who can't watch the market. Consider it a part-time job during market hours.

If you don't hedge and the stock moves, you accumulate delta exposure. If the stock keeps moving in that direction, you'll profit from gamma + directional. If it reverses, you'll lose on both. Missed hedges add variance to your P&L but don't necessarily mean loss - it's just less controlled.

Track your cumulative P&L in three buckets: (1) Gamma scalps (sum of all hedge profits), (2) Theta decay (option time decay), (3) Transaction costs. If Gamma scalps > Theta + Costs, you're profitable. Calculate this daily or weekly to monitor progress.

Yes, but with lower gamma. Strangles have less gamma than straddles (OTM options have less gamma than ATM). This means fewer hedge opportunities and smaller scalps. However, strangles cost less (lower theta). The trade-off depends on how much movement you expect.

Start with ±0.20 delta threshold. Track your results: Are you getting enough hedges? Are costs eating profits? If too many small hedges, widen to ±0.25. If missing big moves, tighten to ±0.15. Optimize based on the specific stock's movement pattern and your costs.

Not necessarily. Some traders hedge to 'near zero' (within ±0.05) to save on transaction costs. Others maintain a small bias if they have a directional view. Pure theory says zero delta, but practical considerations allow flexibility.

An IV increase benefits your long options (vega profit). You can choose to: (1) Continue scalping and enjoy the vega bonus, (2) Exit to lock in vega profit, or (3) Sell some options to reduce vega and lock in profit while continuing to scalp the rest. Many traders exit on significant IV spikes.

Accept overnight risk as part of the strategy. You can't hedge during ASX close. Keep position size reasonable for potential overnight gaps. Some traders reduce position before close if expecting overnight volatility. Review overnight moves at open and hedge immediately if needed.

Consider rolling at 14-21 DTE. Closer to expiration, theta accelerates relative to gamma benefits, and gamma becomes unstable. Roll to next month's expiration to reset the favorable gamma/theta ratio. Also roll if the stock has moved far from your strike (gamma has decreased).

Gamma scalping is highly path dependent. The same start and end prices can produce vastly different P&Ls depending on the path. A stock that oscillates 10 times captures more gamma than one that moves smoothly. This is why realized variance (capturing the path) matters more than simple price change.

In theory, continuous hedging captures all gamma. In practice, discrete hedging at finite intervals captures less (replication error). The optimal frequency balances: (1) Capturing more gamma (more frequent = better), (2) Transaction costs (more frequent = worse). Mathematical models suggest cost-adjusted optimal frequency depends on vol, costs, and gamma.

Use Greek-based attribution: (1) Delta P&L: Σ(Delta × ΔS), (2) Gamma P&L: Σ(½ × Gamma × (ΔS)²), (3) Theta P&L: -Theta × Days, (4) Vega P&L: Vega × ΔIV, (5) Costs: Σ(Commissions + Spread). Sum should approximately equal actual P&L. Differences are higher-order effects and path dependency.

Yes, with limitations. Interactive Brokers offers API access suitable for automation. You can build systems to monitor delta and execute hedges. Challenges: ASX data quality, latency, overnight handling. Full automation requires coding skills, infrastructure, and testing. Semi-automated (alerts + fast manual execution) is more accessible for retail.

Calculate theoretical P&L using the formula ½ × Gamma × Σ(ΔS)². Compare to your actual hedge P&L. Differences come from: (1) Discrete vs continuous hedging, (2) Non-zero delta at hedge times, (3) Changing gamma as stock moves, (4) Transaction costs. Your actual P&L will typically be lower than theoretical due to these frictions.