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root strategies
Root Strategies: Final Review
Recap concepts related to risk profiles and single-leg strategies
Gamma: Profit/Loss Momentum
Gamma tells you how the momentum of your P/L should change based on price movement. Positive gamma means your P/L will speed up as you profit, and slow down as you lose. Negative gamma means our P/L will slow down as you profit, but speed up as you lose.
Shares Do Not Carry Gamma
Share P/L changes at a constant rate, regardless of winning or losing.
Long Options Carry Positive Gamma
Long option delta grows into profit, and shrinks into loss – this means P/L will speed up as the position profits and slow down as the position loses.
Short Options Carry Positive Gamma
Short option delta shrinks into profit, and grows into loss – this means P/L will slow down as the position profits and speed up as the position loses.
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