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Gamma Trading – Cashflowing Volatility

A little known technique option traders can utilize to produce steady cashflow in wildly moving markets is called Gamma Trading. When stocks are moving around crazily and volatility levels are high, this is a perfect trading method to suck out profits. Unlike the usual option income strategies like the iron condor, calendar spreads, and credit spreads, this method of trading is ideal for out of control stocks and indexes.

Gamma trading lets a trader to out on a trade that will benefit when the stock being used moves either way. Then, once a gain is realized, using a very simple procedure, that profit can be locked in WHILE the overall position gets ‘re-set’ so that it can once again profit no matter what the stock winds up doing.

When gamma trading – the gamma trader has no opinion of which way the stock being used will be heading. He/She doesn’t care. It can up – it can go down – it makes no difference. It profits either way.

But here is the cool part. Once it DOES realize some profit – that gain can be captured – locked in – and then the trade automatically get re-set to do it again. And this scenario can be repeated numerous times – over & over – constantly pulling money out of the position as the underlying girates around.

Have you ever bought a stock, had it start off going in the right direction – actually making you money – when all of a sudden the darn thing reverses wiping out all your gains?

Gamma Trading remedies this – because once a profit is realized – you lock that profit in while still allowing it to profit if the move continues – OR – even if it reverses back towards it starting point. After you lock in that gain – you can still profit – regardless of continued market action.

This strategy is not only a profitable and stress free way to trade – it’s an extremely enjoyable way to trade as well. It allows the trader to pull consistent income from volatile markets without having to pick, worry, or stress out about direction.

Next will be how to pick the proper stocks / indexes for trading this strategy for maximum profits – along with an easy follow by numbers method to correctly put these trades on and adjust them to lock in gains and continue profit regardless of future direction.

Gamma Trading

The purpose of this blog is to discuss gamma trading – how it works – and how to correctly gamma trade.