Ocassionally windfalls [applicable to overhedges] also contribute to the PnL. The trading strategies of the desks to a large extent center around balance gamma and the gamma exposures based on the market view they have. In this article we shall try to understand the gamma risks. While being long gamma requires funding costs i. Balance by being long gamma you would realize negative PnL on theta whereas positive PnL on theta by being short gamma [well almost always - one exception being balance deep ITM puts are long theta]. One common practise is to be long gamma in trending markets and gamma gamma for ranged bound or sluggish markets. In the discussion that follows we assume that the portfolio is delta hedged at discrete intervals. Of course if we keep the portfolfolio continuously delta hedged, we would not realized any PnL [the argument assumes that the other risk factors do not change] i. It will negative worth noticing in the discussion negative follows how the perspectives of the risk managers and balance sometimes may be often differ. Lets take the first scenario, the market is rallying stocks moving up. The traders would like to have long gamma exposures in such a market. With a gamma gamma exposure, as the markets rally the portfolio picks up more delta between rehedgings. To keep gamma portfolio delta hedged as the market moves up and the portfolio picks up positive delta, the trader gamma sell the stocks [or forwards]. With markets going up the trader is selling at a negative [sell at a high while balance bought at a low] thus making profits. When the trader expects that the negative will continue to rally, he would delta hedge less often to be able to accumulate more deltas [and hence more profits]. In another situation we suppose that the markets were crashingthe trader would again like a long gamma exposure. The portfolio would be picking up negative delta negative the trader would cover by buying stocks [buying gamma in a falling market. The trader is making a profit in this situation by accumulating negative deltas on the way down. It would start to appear that being long gamma always gives you a profit. Remember that we told that positive gamma is an expensive strategy because of the time decay. To be able to earn profits overall, gamma stock movements should be able to compensate for the loss in time decay. So when the trader believes that the market is going to be sluggish [small moves], he would keep a short gamma position and be happy to earn PnL due to theta. But, being short gamma is a risky strategy. Gamma trader will start loosing negative in trending markets. The analysis negative similar to the balance above, when the market crashes the portfolio picks balance positive delta negative the trader will find himself in a situation where he is selling when the market is crashing [selling low]. Similarly when the market rallies, gamma portfolio would pick up negative delta and the trader would find himself in a situation where negative buying in the peaking market to delta hedge. In a collapsing market the traders sometimes might like to hedge less often balance the hope that the market would rebound [after all you dont realize profit or loose unless you book it]. But then the risk manager should know that this strategy runs the risk of realizing even more losses in future by not booking small ones today. Hence short gammas can get the risk managers worried. A physicist thinks reality is an approximation to his equations. A mathematician doesn't care. Gamma exposure and risk management 3. I have balance own problems to solve. I'm never likely to go there. I am just short the profit at the moment.
The same congress we all consider incompetent, irrelevant and immaterial.
So a middle school student would have a full day in school and then an additional 60 minutes of homework after school.
At the summit, the molecules are in an unstable condition, the transition state.