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+892 Part VI: Measuring and Trading Volatility 
+respect to more than one risk variable requires one to approach the problem as he 
+did when the position was established: Neutralize the gamma first, and then use stock 
+to adjust the delta. Note the difference between this approach and the one described 
+in the previous paragraph. Here, we are trying to adjust gamma first, and will get to 
+delta later. 
+In order to add some positive gamma, one might want to buy back (cover) some 
+of the January 70 calls that are currently short. Suppose that the decision is made to 
+cover when XYZ reaches 65.50 in 14 days. From the graph above, one can see that 
+the position would be approximately gamma short 700 shares at the time. Suppose 
+that the gamma of the January 70 calls is 0.07. Then, one would have to cover 100 
+January 70 calls to add 700 shares of positive gamma to the position, returning it to 
+gamma neutral. This purchase would, of course, make the position delta long, so 
+some stock would have to be sold short as well in order to make the position delta 
+neutral once again. 
+Thus, the procedure for follow-up action is somewhat similar to that for estab­
+lishing the position: First, neutralize the gamma and then eliminate the resulting 
+delta by using the common stock. The resulting profit graph will not be shown for 
+this follow-up adjustment, since the process could go on and on. However, a few 
+observations are pertinent. First, the purchase of calls to reduce the negative gamma 
+hurts the original thesis of the position - to have negative vega and positive theta, if 
+possible. Buying calls will add vega to and subtract theta from the position, which is 
+not desirable. However, it is more desirable than letting losses build up in the posi­
+tion as the stock continues to run to the upside. Second, one might choose to rerrwve 
+the position if it is profitable. This might happen if the volatility did decrease as 
+expected. Then, when the stock rallies, producing negative gamma, one might actu­
+ally have a profit, because his assumption concerning volatility had been right. If he 
+does not see much further potential gains from decreasing volatility, he might use the 
+point at which negative gamma starts to build up as the exit point from his position. 
+Third, one might choose to accept the acquired gamma risk. Rather than jeopardize 
+his initial thesis, one may just want to adjust the delta and let the gamma build up. 
+This is no longer a neutral strategy, but one may have reasons for approaching the 
+position this way. At least he has calculated the risk and is aware of it. If he chooses 
+to accept it rather than eliminate it, that is his decision. 
+Finally, it is obvious that the process is dynamic. As factors change (stock price, 
+volatility, time), the position itself changes and the strategist is presented with new 
+choices. There is no absolutely correct adjustment. The process is more of an art than 
+a science at times. Moreover, the strategist should continue to recalculate these prof­
+it pictures and risk measures as the stock moves and time passes, or if there is a