The Bucking Gamma Bull
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It's a simple question of risk management. Assuming you're long theta / short gamma in any size, you'll be hedging your deltas within some tolerable range. But the larger your gamma exposure, the more your deltas will change as the underlying moves around, and as gamma exposure grows toward the end of an expiration cycle, it can become increasingly difficult and impractical to hedge that directional risk.Think of your deltas as a mechanical bull, and your gammas as the rate and intensity at which the bull throws you around. The ride starts off quietly, but as time goes on the bull gets increasingly difficult to ride, and eventually you're likely to be thrown. That's exactly what happens during an expiration week in which the underlying makes an unexpected move: option shorts can't control their directional risk as easily as they'd like and have to hedge more deltas to stay on the ride, which only feeds the existing move in the underlying, which -- because of all that negative gamma -- forces options shorts to hedge even more deltas and so on into a downward spiral of flailing limbs, bruises, and spilled beer.
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