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+Chapter 40: Advanced Concepts 891 
+Figure 40-14 depicts the fact that gamma is not very stable, considering that it 
+started at nearly zero. If XYZ falls, gamma increases a little, reflecting the fact that 
+the position will get somewhat shorter as XYZ falls. But since there are only calls cou­
+pled with short stock in this position, there is no risk to the downside. Positive 
+gamma, even a small positive gamma like this one, is beneficial to stock movement. 
+The upside is another matter entirely. The gamma begins to become seriously 
+negative above a stock price of 63 in 7 days. Recall that negative gamma means that 
+one's position is about to react poorly to price changes in the market - the position 
+will soon be "fighting the market." As the stock goes even higher, the gamma 
+becomes even more negative. These observations apply to stock price movements in 
+either 7 days or 14 days; in fact, the effect on gamma does not seem to be particu­
+larly dependent on time in this example, since the two lines on Figure 40-15 are very 
+close to each other. 
+The above information depicts in detailed form the fact that this position will 
+not behave well if the stock rises too far in too short a time. However, stable stock 
+prices will produce profits, as will falling prices. These are not earth-shattering con­
+clusions since, by simple observation, one can see that there are extra short calls plus 
+some short stock in the position. However, the point of calculating this information 
+in advance is to be able to anticipate where to make adjustments and how much to 
+adjust. 
+Follow-Up Action. How should the strategist use this information? A sim­
+plistic approach is to adjust the delta as it becomes non-neutral. This won't do 
+anything for gamma, however, and may therefore not necessarily be the best 
+approach. If one were to adjust only the delta, he would do it in the following 
+manner: The chart of delta (Figure 40-13) shows that the position will be 
+approximately delta short 800 shares if XYZ rises to 64.50 in a week. One sim­
+ple plan would be to cover the 800 shares of XYZ that are short if the stock rises 
+to 64.50. Covering the 800 shares would return the position to delta neutral at 
+that time. Note that if the stock rises at a slower pace, the point at which the 
+strategist would cover the 800 shares moves higher. For example, the delta in 14 
+days (again in Figure 40-13) shows that XYZ would have to be at about 65.50 for 
+the position to be delta short 800 shares. Hence, if it took two weeks for XYZ to 
+begin rising, one could wait until 65.50 before covering the 800 shares and 
+returning the position to delta neutral. 
+In either case, the purchase of the 800 shares does not take care of the negative 
+gamma that is creeping into the position as the stock rises. The only way to counter 
+negative gamma is to buy options, not stock. To return a position to neutrality with