The September 28 session offered a clear illustration of how the strategy performs in a two-way market.
Trading opened with a gap lower, and the decline extended to the lower bound of the portfolio's gamma-protection range. A break below that level would have activated the position's convexity; instead, the market found support at the put wall and reversed higher.
By the close, prices had reached the upper bound of the range. A move through it would likewise have shifted the portfolio into positive convexity, but the market pulled back from that level as well and settled in the neutral zone between the two bounds.
Although neither bound was breached, the day's result came in close to the strategy's target daily return.
Editor’s Note reflects the author’s market perspective at the time of publication and should be read as commentary, not investment advice.
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