Hedged option P&L
Definition · Level 5 · Greeks & volatility
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A delta-hedged option’s day: about ½ × gamma × move² plus theta. It is positive when the stock realizes more volatility than the option’s implied volatility, and negative when it realizes less.
Example
Bought at 25 vol, stock realizes 35: scalping beats theta on average.
Where Tradecraft teaches it
Level 5 · Greeks & volatility, in the lesson “Gamma scalping: what a hedged option bets on”: Why long gamma buys low and sells high, and why the result depends on realized versus implied volatility.
Related terms
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