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What is gamma?

Aside from being a cool Greek letter, gamma is a very important parameter for options. In fact, I would like to advance the notion that gamma is perhaps the most important parameter of any option position. In a succinct way, gamma is the quantification of Optionality. If our portfolio has a gamma of zero, then we are not trading options at all.

Any options trader per definition is a gamma trader. Even if we trade a single lonely option or a very complex option book, we are taking a position in gamma. We could be long or short gamma, but one thing is for sure: if we have options in our portfolio, we are gamma traders.

What is the purpose of this site?

Trading any asset is conceptually simple: the old "buy low, sell high" saying. However, options are very complex instruments and they can behave in ways that seem counterintuitive to a novice trader. For instance, they can lose money even in situations when we think we are actually going to make money. Unfortunately, the existing literature about options trading is very lacking, and suffers from either over-simplification (just listing common option strategies), or they are too advanced for traders without a strong mathematical background (any volatility trading book).

The idea of this website is to provide information that is pertinent and at a level of abstraction that makes it approachable even for traders without a strong background in Calculus. Hopefully the information contained here can be useful to all of you and can make you a better options trader.

What this site is not

Trading any asset carries risk. Trading options is even riskier because they are affected by many more sources of risk than standard shares, for instance, or derivatives like futures or CFD's. It is impossible to design a bulletproof "system" that always make money, or an strategy that generates "income", and in fact it is impossible to design any options position that makes money consistently just because you open them. If you see books or websites that use those kinds of keywords ,or make those kind of claims, just run and stay as far away from them as possible because they are selling you snake oil. If you want to make money, you need to risk money. Riskless profit is not part of what I want to do here in this site, as it is basically impossible. There is no holy grail, sorry to disappoint you. However, being a more informed trader, and having a greater knowledge of options will give you the tools to design and execute options trades that will deliver the best return for your thesis and risk profile.

How is this site organized?

The whole idea for this website comes from the material I was writing for an upcoming volatility book. At the very end, I decided to pay homage to the original intent of the Web and the HTML language, so I decided to publish the book in web format, full of hyperlinks between pages so you could read it in a nonlinear fashion - very fitting for a book about a nonlinear derivative. So please start from the beginning and enjoy.