Options gamma reflects the relationship between the delta of the option and the current market price of the underlying asset and is positive for long positions and negative for short. The idea of the delta neutral strategies is to profit from volatility and time, as they are much more easily traded than the direction of the price move. To achieve this, traders must keep the delta of the position close to neutrality. You can buy or sell the underlying asset or options to manage the delta of the position. This process is called gamma scalping.

When we have a delta neutral strategy with short options, its gamma will be negative. If the price of the underlying asset goes up or down the delta of the position will change. The problem is that we will get longer in falling market, or shorter in rising market. What we can do is to close the losing options and sell new options with strikes farther away from the current market prices. The other strategy for gamma scalping is to buy and sell the underlying. For example, if the price goes up the delta of the options structure will go from 0 to -20. If we buy at the spot market 20% of the size of the options position, the delta will go back to zero.

Knowing the gamma scalping can help you when trading the spot market. When there is a large option expiry near the current market levels, the counterparties of the options trade manage actively their deltas and spot price stays in close proximity to the options strike.