The Skinny on Options: Abstract Applications - October 12, 2020 - A Convex Kind of Risk


Oct 12 2020 15 mins   4
As traders, [our returns](https://www.tastytrade.com/tt/shows/trade-logic-unlocked/episodes/more-risk-less-return-06-27-2019 ) will always be determined by direction to some degree. This is especially true in one-sided markets, as we trade in 45-day increments. Still, our management techniques are designed to minimize the effects of directional exposure, or gamma risk, as much as possible. And while most seasoned tastytraders might know what gamma risk is, today, we bolster that understanding with why it exists. Not surprisingly, the answer lies deep within the Black-Scholes Option Pricing Model.