Zero Hero trades are highly speculative options trades made on expiry day. Traders bet on low-premium options, hoping for a quick spike in value. But what causes these dramatic movements? Let’s dive in!
Delta measures how much an option’s price changes with the underlying asset’s movement. It’s crucial to know that as the price nears the strike, Delta can cause premiums to rise quickly.
Gamma tracks how Delta changes with the underlying asset’s price. On expiry day, Gamma can spike, leading to rapid increases in Delta and, consequently, the option's premium.
As an option becomes at the money on expiry day, Gamma surges. This sudden "Gamma Blast" drives up Delta, causing the option's premium to soar, often unexpectedly.
While Zero Hero trades can yield massive profits, they are risky. The premium can drop just as fast as it rises, leading to significant losses if the trade isn’t perfectly timed.
To capitalise on the Gamma Blast, traders must be vigilant, understanding when the option might go at the money. But remember, it’s like catching lightning in a bottle!
Zero Hero trades offer exciting opportunities but come with high risks. For most traders, it’s a gamble. Know the Greeks, stay informed, and trade cautiously!