Expiry day trading is mostly focused on option selling, but many option-selling strategies have very high negative gamma, and spreads do not offer an attractive risk-to-reward ratio.
On some expiry days, the market becomes extremely volatile. Stop losses are hit easily, but later the same strikes end up decaying to almost zero. This makes managing positions quite difficult.
I wanted to ask experienced traders: what methods do you use to reduce gamma risk on expiry days? How do you adjust your positions when volatility suddenly increases?
It’s better to be gamma positive on expiry if you’re playing on 0day. If you are gamma negative, you need strict SL or more days to expiry(more absolute theta) - definitely not 0day.
Hedging is probably the only way to manage gamma. Price action also gives a pretty decent hint about which side (CE or PE) is likely to be hit with gamma- so one can prepare in advance (by exiting, reducing or heding the positions).
Gamma becomes significantly elevated in the second half so that’s another parameter to work with.