Discussing the article: "Automating Black-Scholes Greeks: Advanced Scalping and Microstructure Trading"
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Check out the new article: Automating Black-Scholes Greeks: Advanced Scalping and Microstructure Trading.
Gamma and Delta were originally developed as risk-management tools for hedging options exposure, but over time they evolved into powerful instruments for advanced scalping, order-flow modeling, and microstructure trading. Today, they serve as real-time indicators of price sensitivity and liquidity behavior, enabling traders to anticipate short-term volatility with remarkable precision.
Our primary objective is to create an automated trading system that dynamically manages option positions through continuous delta hedging and strategic gamma scalping. The core concept revolves around maintaining a delta-neutral portfolio while capitalizing on gamma-driven price movements. Since options' delta values change as the underlying asset price moves (a phenomenon measured by gamma), we need an automated system that can continuously monitor these Greek exposures and execute trades to rebalance the portfolio. This approach aims to profit from the volatility of the underlying asset rather than its directional movement, creating a market-neutral strategy that generates returns through frequent, small adjustments rather than betting on price direction.
Author: Hlomohang John Borotho