this is no secret but effectively trading long puts and long calls is tricky so not many people are willing to take the risk. reproducing exactly what was done is impossible to see without describe the full trade.
from last friday, i bid 2 ES contracts @ 1610. i waited until price approached my mark and bought 5 calls strike 1610 @ 4950 AS the 1610s executed in flat price. now in this example, i was wrong about my entry and it pushed to 160825 which means I overpaid for the options and really should have been buying a Sept 1605 strike. but, trading is an art, not a science so c'est la vie. as expected, due to the demand nature of the entry location, a quick pull back occurs which is then retested by the algos in the hourish that follows. in principle, if retest holds you are good to add. i buy 2 more at base of prebreakout candle (since everything is a fractal test of a test of a test of a test. you will more than likely get a fill if you are patient). so long 4 @ 1612 avg w/ 5 calls @ 4950. now this time, i made an error in judgement (happens all the time). i sell to close those calls at resistance @ 1624 gamma or 5200. while holding the remaining 4 contracts, i got faked out in the early afternoon and dumped 2 contracts @ 1620. market finds support in an area i did not anticipate but i kept some risk on the table as i rarely will puke an entire position all at once. i took profit on the last two contracts @ 1628, just 2 ticks off the intraday high. 10 ticks on 5 calls, 10 handles on 2, 14 handles on 2 (effectively 96 ticks on 4).
so, in summary, the underlying idea of a gamma turnaround trade is to buy the nearest ATM call/put at whatever market price AS gamma (underlying price) approaches your desired entry. further explained, the vega (IV) maxes its relative move in a given direction at that exact moment as price approaches your entry at anticipated demand (or supply). therefore the price of the front option is at the bare minimum in that moment in time. hope this helps. i am not a good explainer.
from last friday, i bid 2 ES contracts @ 1610. i waited until price approached my mark and bought 5 calls strike 1610 @ 4950 AS the 1610s executed in flat price. now in this example, i was wrong about my entry and it pushed to 160825 which means I overpaid for the options and really should have been buying a Sept 1605 strike. but, trading is an art, not a science so c'est la vie. as expected, due to the demand nature of the entry location, a quick pull back occurs which is then retested by the algos in the hourish that follows. in principle, if retest holds you are good to add. i buy 2 more at base of prebreakout candle (since everything is a fractal test of a test of a test of a test. you will more than likely get a fill if you are patient). so long 4 @ 1612 avg w/ 5 calls @ 4950. now this time, i made an error in judgement (happens all the time). i sell to close those calls at resistance @ 1624 gamma or 5200. while holding the remaining 4 contracts, i got faked out in the early afternoon and dumped 2 contracts @ 1620. market finds support in an area i did not anticipate but i kept some risk on the table as i rarely will puke an entire position all at once. i took profit on the last two contracts @ 1628, just 2 ticks off the intraday high. 10 ticks on 5 calls, 10 handles on 2, 14 handles on 2 (effectively 96 ticks on 4).
so, in summary, the underlying idea of a gamma turnaround trade is to buy the nearest ATM call/put at whatever market price AS gamma (underlying price) approaches your desired entry. further explained, the vega (IV) maxes its relative move in a given direction at that exact moment as price approaches your entry at anticipated demand (or supply). therefore the price of the front option is at the bare minimum in that moment in time. hope this helps. i am not a good explainer.
Attached Image (click to enlarge)
Any prices quoted are futures
