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How does gamma on options affect the profitability of cryptocurrency trading?

avatar071 Parameshwaran M MechDec 20, 2021 · 3 years ago1 answers

Can you explain how the gamma on options impacts the profitability of cryptocurrency trading? What are the key factors to consider when analyzing gamma in the context of cryptocurrency trading?

How does gamma on options affect the profitability of cryptocurrency trading?

1 answers

  • avatarDec 20, 2021 · 3 years ago
    When it comes to the profitability of cryptocurrency trading, gamma on options can have a significant impact. Gamma measures the rate of change of an option's delta in relation to changes in the underlying asset's price. In simple terms, it tells us how much the option's delta will change for every $1 move in the underlying asset's price. Higher gamma values mean that the option's delta will change more rapidly with price movements, which can result in larger profits or losses depending on the direction of the price movement. Traders should carefully analyze gamma alongside other factors such as volatility and time decay to assess the potential profitability of their options strategies in cryptocurrency trading.