Gamma Blast Strategy: What is Gamma? Expiry Day Zero Hero Trade

[00:03] ? And why most traders lose their entire capital in this trade. If you are also making losses by taking trades without understanding on the day of expiry, then this video is very important for you. In today's video we will know

[00:17] In today's video we will know ? What is the role of gamma blast behind this ? And how can you recognize this blast ? There are many retail traders who have very little capital.

[00:30] Many retail traders are always waiting to hit a big jackpot by investing less money. But the problem is that they do not know why there is this increase in premium. Only a few retail traders are able to make profits and many retail

[00:44] traders incur losses. He just sees the price and takes entry. Here most of the retail traders do not know

[00:56] and when the premium of the ₹5 option suddenly falls, then the entire capital becomes zero. They do not know what is the reason behind this. This is why many traders treat it like gambling or jackpot trading and call it Zero Hero

[01:10] Trade. If we want to know the reason behind this, then first we have to understand Delta and Gamma in Option Greeks. If the stock price of Nifty 50 is currently 24,000 and at the same time the delta of the call option of the same strike price is

[01:25] delta of the call option of the same strike price is currently 0.50. So if Nifty increases by 100 points to 2400, then the premium of this call option will increase by 100 * 0.50 i.e. 50 points. You should look carefully at the option chain. You will understand that the

[01:42] delta value of an OTM option is always between 0.0 and 0.50. The delta value of ATM options is around 0.50 and the delta of ITM options ranges from 0.50 to one. The delta of a call option is counted as positive and the

[01:58] delta of a put option is counted as negative. The value of delta is not always fixed. This keeps changing from time to time. Now we have to understand Gamma if Nifty 50 is currently at 24,000 and the delta value of ATM call option at this strike price

[02:12] is currently 0.50 and the gamma value is currently 0.008. If Nifty increases by 100 points, the value of Gamma will be 100 points increase in strike price multiplied by Gamma value 0.008

[02:26] Gamma value 0.008 which will be 0.08. This means that you had taken an ATM call option with a strike price of ₹2,000, and due to the price increase of ₹100, your strike price of ₹2,000 has now become ITM. Due to which your gamma value

[02:41] increased from 0.008 to 0.08. Now understand that with the price being 24,00, your strike price of 24,000 has now become ITM. Due to which the Due to which the delta value of the strike price of Rs 24,000 will also change. 0.50 +

[02:57] 0.08 which is now the gamma value, plus this the delta value of the strike price of 24,000 will become 0.58. Now multiply the delta value, which is the option premium increase of 100 points,

[03:11] option premium increase of 100 points, which is 58. Now let us understand this with an example. If you had taken the premium of ₹2,000 ATM call option at ₹300, then now its premium will become ₹358 after the increase of 100 points. Friends,

[03:27] Theta and Vega also play an important role in the increase or decrease in the premium of an option. And it also depends on whether the price increase of ₹100 has happened fast or slowly. Due to this time decay your premium starts decreasing. All you have to understand is that

[03:43] in any option trading, the out of the money option always has a low gamma and the at the money option has the highest gamma and the in the money option has a high gamma at the beginning. But the deeper the option is in the money, the lower its gamma. This

[04:00] means that as the price moves away from at-the-money, its gamma decreases. But on the opposite side, as the price moves in the money, the as the price moves in the money, the delta of the option increases.

[04:13] clear? But the real question is how does the gamma blast happen on the day of expiry ? Let us understand this. The Gamma chart on the expiry day looks something like this. Here we are looking at the call option of 24,000 in Nifty 50 today. Now

[04:27] as the market slowly approaches the 24,000 level, the value of delta and gamma gradually starts increasing. But as soon as the price reaches the level of 24,000, our call option becomes at the money. Because at the money options have the highest gamma.

[04:43] Therefore, as soon as the option is at the money, the gamma of this option increases suddenly. Due to which the delta also increases very rapidly and hence the premium of our option also increases very rapidly. That is why it is called Gamma Blast in trading language. That

[04:57] called Gamma Blast in trading language. That 's why you see such big spikes on the option premium charts in the last few days before expiry.

[05:09] Due to which the option premium trading at ₹2, ₹5 suddenly reaches ₹50 or ₹100 or even higher. That's also why Gamma Blast is called Zero Hero these days. But as soon as the price becomes in the money, the

[05:24] value of gamma starts decreasing again. Due to which the option premiums start decreasing suddenly and the option premium candles suddenly hit a high and then start coming down again. Due to which a long upper week is formed on the upside because the

[05:39] value of delta remains the same but due to the increased value of gamma which decreases drastically, the premium of the option decreases drastically. Therefore, the option should not be bought at such an increased premium on the day of expiry. After waiting for a while, one should make the entry only after the Gamma

[05:54] effect reduces and the premium price becomes normal. Now how can we catch this gamma blast first ? Let us know. Now ? Let us know. Now you have a chart of NFT 50. It's just past

[06:07] 1:00 in the afternoon. Currently the market is at 24,000. So this level is the at the money strike price on the chart and below it is the in the money strike price. Also, all the above options are out of the money. Now we think the price may go up.

[06:24] So here we are going to go 100 points above 24,000 and buy the out of the money option go 100 points above 24,000 and buy the out of the money option i.e. the call option of 24,00. Because the premium of this option is low and the deeper we go out of the money, the

[06:37] premium decreases further and the risk also increases. Because only a few hours are left for expiry. If you take a long-range out-of-the-money option and the price does not move according to your expectations or the market goes sideways, then the entire

[06:51] amount traded will become zero. It all depends on how much risk you want to take on Zero Hero trades. Let's continue. Here, as per our analysis, when the price moves up and tries to cross 24.00, then due to

[07:06] increase in the value of Gamma, the delta of our option will increase suddenly and hence the premium of our option will also increase rapidly in the same manner. So that we can make good profit here because of gamma blast. But I request you that the

[07:20] win rate in such trades is very low. You should never trade Zero Hero with your entire capital. You should never trade Zero Hero with your entire capital. zero in a single day and on the day of expiry, you

[07:38] only the time value i.e. theta value remains in it. If the price does not rise and if the market goes sideways even for a short period, then there are high chances of your premium becoming zero. Friends, if you

[07:52] found the video inspiring, then please like and comment and subscribe to the channel so that you do not miss our upcoming videos. See you in the next video. Till then trade smart, trade safe. Thank you.