Day Two
The next day, the market is a bit quieter. There is a $0.40 drop in the price
of the stock, at which point the position delta is short 1.12. Harry buys 112
shares at $39.60 to get delta neutral.
Following Harry’s purchase, the stock slowly drifts back up and is trading
at $40 near the close. Harry decides to cover his deltas and sell 112 shares
at $40. It is common to cover all deltas at the end of the day to get back to
being delta neutral. Remember, the goal of gamma scalping is to trade
volatility, not direction. Starting the next trading day with a delta, either
positive or negative, means an often unwanted directional bias and
unwanted directional risk. Tidying up deltas at the end of the day to get
neutral is called going home flat.
Today was not a banner day. Harry did not quite have the opportunity to
cover the decay.