If you do not understand what is going on below on a “Gamma scalping” strategy on BTC (bitcoin as an asset) You should never ever try trading on any asset class 🙂
How a real fund makes money from volatility (step-by-step, using $100,000 BTC)
Assume:
- BTC price = $100,000
- A fund wants exposure to volatility, not direction
- They buy a BTC ATM straddle (call + put at 100k)
- Delta ≈ 0
- Gamma > 0 → the part that generates money
- They also own BTC spot for hedging.
- Let’s say the fund holds 1 BTC worth $100,000 as inventory for hedge adjustments.
At the start:
Delta-neutral. No directional risk.
Now let’s see how they profit.
Step 2 – BTC goes up 10% → $110,000
Straddle delta becomes +0.5 BTC.
The fund is unintentionally long 0.5 BTC.
To go back to neutral:
The fund sells 0.5 BTC at $110,000.
Cash received:
0.5 × 110,000 = $55,000
Theoretical cost basis (100k):
0.5 × 100,000 = $50,000
Profit from hedge = $55,000 – $50,000 = $5,000
Plus, the straddle increased in value due to volatility.
Step 3 – BTC drops 10% → $90,000
Now straddle delta flips negative: –0.5 BTC
To get back to neutral:
The fund buys 0.5 BTC at $90,000.
Cash paid:
0.5 × 90,000 = $45,000
If they later sell that BTC at the baseline of 100k:
Profit = $50,000 – $45,000 = $5,000
Again, without needing BTC to go up or down, “as predicted.”
This is called:
Gamma scalping — the quiet, relentless engine behind institutional P&L.