The Hidden Power of Negative Gamma

Ilia Bouchouev
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Ilia Bouchouev: Pentathlon Investments, LLC

Chapter 9 in Virtual Barrels, 2023, pp 187-208 from Springer

Abstract: Abstract This chapter looks at writing oil options from the perspective of the insurance product, which is the essence of gamma trading and the resulting volatility risk premium. We dissect the historical performance of various strategy specifications from multiple angles, introduce the concept of the VRP smile, and identify regime breaks caused by changing behavior of large market participants.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-031-36151-7_9

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DOI: 10.1007/978-3-031-36151-7_9

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