In this episode of Excess Returns, Matt Zeigler sits down with Kris Abdelmessih and Matt Cashman to break down one of the most important — and often misunderstood — concepts in options: gamma. They explore what gamma really is, how it interacts with delta and theta, why gamma scalping (a.k.a. delta hedging) matters, and what both individual traders and professionals need to know about it. If you’ve ever wondered how options traders actually make money from volatility, this is your guide.

Topics Covered

• Why understanding gamma is critical to options trading

• The relationship between gamma, delta, and theta

• Using physics and middle school math to explain gamma’s role

• How gamma P&L works and why it creates curvature in returns

• Where gamma “lives” (at-the-money vs. in/out of the money, short vs. long dated)

• The mechanics of gamma scalping and delta hedging

• Why option trading is really volatility trading

• The practical applications for retail traders and professionals

• Common misconceptions about “income from options”

Timestamps
00:00 – Why gamma matters in options trading
02:22 – Defining gamma and its sensitivity to price moves
05:04 – Practical explanation: delta vs. gamma
09:00 – Physics/acceleration analogy for gamma P&L
18:00 – Mapping acceleration math to options gamma
23:30 – Where gamma lives: at-the-money and near-expiry options
29:00 – Introduction to gamma scalping (delta hedging)
36:00 – When gamma trading works best (volatility path dependence)
41:00 – Real-world applications for individuals and professionals
47:14 – Why selling options isn’t “guaranteed income”

What can bar bets, coin flips, and the length of your subway commute teach us about options pricing? In this episode of Excess Returns, Matt Ziegler is joined once again by Kris Abdelmessih to break down complex options theory into intuitive, real-world analogies. From prediction markets to probability distributions, Kris helps us understand how the options market reveals what the stock market often hides—how investors are pricing not just if something happens, but how much it matters when it does. This is options math with a twist, taught like you’re five, but ready for Wall Street.

📈 Whether you're an investor trying to size a high-risk, high-reward position, or simply curious about how the market “thinks” about uncertainty, this episode is full of mental models you’ll want to revisit.

📌 Topics Covered:

• Coin flips vs. futures: the two dominant styles of betting

• Over/under bets and what they teach us about prediction markets

• Why odds ≠ probabilities—and how to convert between them

• The difference between probability and magnitude in financial outcomes

• Bar bets and beer-drinking contests on Wall Street (!?)

• Using call spreads to isolate probabilities, not potential profits

• A visual breakdown of skewed vs. symmetric return distributions

• Why two stocks can have the same price but completely different implications

• How the options market understood the dot-com bust better than most investors

• Why thinking in bets makes you a better investor and allocator

⏱️ Timestamps:

00:00 – The stock market vs. the options market
01:42 – Over/under bets and their connection to options
05:59 – Understanding prediction markets and odds
10:00 – Future-style bets: Magnitude vs. probability
14:35 – The subway commute example and tail risk
19:00 – Why volatility and skew matter in pricing
20:38 – Stock A vs. Stock B: Same price, different outcomes
24:00 – Visualizing probability distributions
28:00 – How call values reflect both vol and probability
32:00 – Truncating the tail: turning options into “bar bets”
35:00 – Using call spreads to extract implied probabilities
37:00 – What investors can learn from this framework
39:00 – Options markets during the dot-com bubble
40:45 – Where to follow Kris online

🎙️ Guest: Kris Abdelmessih
🧠 Follow Kris’s work: https://moontower.substack.com

What if the biggest market moves aren't driven by fundamentals—but by flows you can't see?

In this episode, Brent Kochuba of SpotGamma joins us to explain the hidden mechanics of the options market that are quietly reshaping stock prices. We explore how dealer hedging, gamma squeezes, and volatility dynamics like Vanna and Charm are influencing everything from individual stocks to the S&P 500. Whether you're an active trader or a long-term investor, understanding these forces is crucial to interpreting today’s markets.

We discuss:

• Why dealer flows are moving billions in stocks each day

• What Gamma, Vanna, and Charm really mean—and why they matter

• How implied volatility creates powerful reflexive market moves

• Why options expiration dates often mark key turning points

• What long-term investors should know about short-term flows

• Real-world examples: GameStop, Tesla, Nvidia, COVID, and more

Even if you never trade an option, this conversation will change how you think about market behavior.