Gamma scalping P&L calculator
Convexity against decay, and the breakeven move.
Interactive: gamma scalping P&LMedium
- Move in dollars
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- Convexity gain
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- Time decay
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- Net
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- Breakeven move
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- Reading
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The breakeven move is the honest translation of "implied volatility". The defaults are a long at-the-money option on 1,000 shares at 20% implied vol with a month to run — and the tool returns a breakeven of about 1.05%, which is exactly 20% ÷ √365. That identity is the whole trade: implied vol is the daily move you are paying for. Deliver more and long gamma wins; deliver less and the decay does. Gains here are quadratic in the move — the reason a single large day can pay for a month of small ones, and the reason the short side blows up rather than bleeds.
The idea behind it
This calculator belongs to Volatility, where the mechanism it computes is explained step by step, with the formula, what each input means and where the simple model stops being right. Everything is computed in your browser; nothing you type is sent anywhere.
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