Building a GEX-Based Portfolio
One gamma trade is a tactic. A portfolio built on gamma requires deciding how much of your risk budget belongs to each regime, how correlated your positions really are, and what happens when every name flips at once.
Budget risk by regime, not by ticker
Group positions by the regime that has to hold for them to work. Five credit spreads on five different tickers, all requiring positive gamma, are one bet. Cap total risk per regime bucket at a fixed percentage of account equity.
- Cap regime-bucket risk at 4–6% of equity; single position at 1–2%.
- Track net portfolio delta, gamma and vega, not just per-trade max loss.
- Hold at least one structure that profits if the dominant regime breaks.
Correlation is higher than it looks
Index-component gamma profiles are driven by the same index-level flow. During stress, single-name correlation to SPY approaches one, so diversification across tech names buys almost nothing. Diversify across regime dependence and across time horizon instead.
Laddering expirations
Mixing 0DTE, weekly and monthly structures smooths the gamma profile of your own book: short-dated positions carry the tactical edge while longer-dated ones anchor exposure and reduce the frequency of forced decisions.
Rebalancing rules
Rebalance on regime change and on breach of a bucket cap, never on P&L alone. Write the triggers down; discretionary rebalancing during a negative-gamma session is how portfolios turn into single trades.
Key takeaways
- Positions sharing a regime assumption are one position.
- Manage net portfolio Greeks, not a collection of max-loss numbers.
- Rebalance on regime and cap breaches, on a written rule.
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Educational content only. Options involve substantial risk and are not suitable for every investor. Nothing here is financial advice.