Catch Explosive Moves On Expiry days | Gamma Blast Strategy Revealed

Summary

The 'Gamma Blast' is an options trading strategy that capitalizes on explosive price movements in options near expiry, particularly in the late afternoon. To execute this strategy, traders should enter after 2:30 PM on days with less than a 1% market movement, focusing on at-the-money options. The strategy involves monitoring straddle charts for breakouts, then buying call or put options based on the direction of the breakout. The video provides practical examples from expiry day charts, demonstrating how to identify entry points and set targets for potential high returns.

Takeaways

• 💥 Gamma blast is not a nuclear explosion but an options trading strategy that can result in substantial profits, especially on expiry days.
• ⏳ Timing is key: enter trades after 2:30 p.m., when options prices can spike dramatically.
• 📉 Market movement should be less than 1% throughout the day for the strategy to work; trending days should be avoided.
• 🔄 Focus on the at-the-money (ATM) straddle chart, which reflects both call and put options at the same strike price.
• 📊 The straddle chart is important because it shows how the combined options’ value changes based on market price fluctuations.
• 📈 Use the Dow Theory to identify when a breakout of a previous swing high occurs on the straddle chart—this is the signal to enter the trade.
• 🎯 After spotting a breakout on the straddle chart, switch to the spot chart to confirm the direction and choose either a call or put option.
• 💡 Avoid out-of-the-money (OTM) trades on expiry days, as they carry a higher risk of going to zero.
• 📆 Example: On July 5th, using the Sensex, a breakout occurred at 3:00 p.m., leading to a call option trade that increased in value 14 times.
• 🔎 Always review market conditions and practice the strategy thoroughly before applying it in real trades to mitigate risks.

Q & A

What is the 'Gamma Blast' strategy mentioned in the script?

The 'Gamma Blast' strategy is an options trading technique where traders take advantage of rapid price movements in options, especially near expiry. These movements are driven by sudden shifts in gamma, causing option prices to multiply quickly.

When is the ideal time to enter a trade using the Gamma Blast strategy?

The ideal time to enter a trade using the Gamma Blast strategy is after 2:30 p.m., as most of the explosive price movements occur in the late afternoon.

What kind of market movement is required for the Gamma Blast strategy to work?

The market should not move more than 1% in a day for the Gamma Blast strategy to work. The strategy is best suited for sideways or zigzag market conditions, not trending days.

What is a straddle chart, and why is it important in the Gamma Blast strategy?

A straddle chart is a graphical representation showing the price movement of a straddle option strategy, which involves buying both a call and a put option at the money. It is important because it helps identify breakout points where explosive moves may occur.

How do you identify a breakout using the straddle chart?

To identify a breakout using the straddle chart, traders wait for the price to break the previous swing high or low. Once the breakout occurs, traders switch to the spot chart to confirm the direction of the movement.

What should a trader do if the breakout is on the upside?

If the breakout is on the upside, the trader should buy a call option at the money or one strike out of the money, though out-of-the-money trades are riskier on expiry days.

What is the importance of the 1:3 risk-reward ratio in the Gamma Blast strategy?

The 1:3 risk-reward ratio is important because it ensures that traders can minimize their risks while aiming for a return that is at least three times the amount they risked. This ratio helps manage potential losses and optimize profits.

Why are out-of-the-money (OTM) trades considered risky in the Gamma Blast strategy?

OTM trades are risky because, on expiry days, there is a higher chance that the premium will quickly drop to zero if the price doesn't move in the trader's favor. The volatility makes it harder for OTM options to retain value.

How do traders know which strike price to choose for the straddle chart?

Traders should choose the strike price closest to the current price of the asset at 2:30 p.m. This price is considered 'at the money,' and it is used to set up the straddle chart for analysis.

Why is it necessary to avoid days when the market moves more than 1%?

Days when the market moves more than 1% are considered trending days, which can cause erratic price movements that don't align well with the Gamma Blast strategy. The strategy is more effective in stable, sideways markets.