Absolute Return Strategy


  • Exploit changes in market structure by offering positive convexity to both up and down markets while capitalizing on the underlying risk of a discontinuous "gamma" event (e.g. February 5th, 2018 "Volmageddon", 1987 crash, etc...)


  • Systematically exploit mispricing of simple, vanilla options across all strikes and expiries

  • Monetize during volatility spikes to profit from short term moves.

  • Positions include both puts and calls, initiated to maximize gamma per unit of theta

  • Traded systematically, with at least daily frequency

  • Gains are typically realized quickly and methodically


  • Positive returns across typical market environments: target no "bleed"

  • Positive Gamma = convex upside with large moves in the market

  • Predictable maximum downside


  • May not be tax efficient


  • S&P 500 Index Options

  • SPY ETF Options

  • Options on S&P 500 constituent equities

  • Safe-Haven ETFs

Why Long Gamma?

In our view, there are two very broad categories of positions in options trading: those that are positive gamma and short theta (e.g. buying insurance), and those that are exactly the inverse (e.g. selling insurance). If you are unsure what the concept of gamma or theta entails, please reference here.

Positive gamma positions exhibit convexity, which means that the rate of capital appreciation accelerates as the magnitude of the move in the underlying gets larger. This is why, as we’ll discuss below, negative gamma can lead to ruin: the losses get exponentially larger as the positions move out of your favor.

PnL graph of a long/positive gamma position:

PnL graph of a short/negative gamma position:







Much like an insurance company receiving monthly premiums, short/negative gamma & positive theta exposure typically shows the most consistent results over time, until, quite certainly, it doesn’t. An example of a negative gamma position is to sell a put, which provides a small premium to you unless an infrequent event occurs. The analogy of selling insurance is apt. Insurance premiums come in each month for you, the insurer, until disaster strikes. When the hurricane hits, you’re required to pay all your claims at the same time. Insurers must hold regulatory capital against positions and cannot book profit/loss from receipt of premium, but instead must assume a level of risk and take reserves, so this is not usually a disastrous event for them (though it certainly has been for a handful of large firms). However, public funds and individuals are not insurance companies - those that systematically sell volatility do not hold reserves against "gains." The risk of losing all your capital is not attractive. Many fund managers and individuals alike have met their demise by way of short/negative gamma positions.

We take precisely the other side of this trade, and we do it as cheaply as possible, thus maximizing our gain during the disaster. On the other hand, the max loss with negative gamma can be exponentially greater in magnitude than the premium collected. The max loss with positive gamma positions is predefined: your loss is limited to the exact price you paid for the option. But even better, your gain can be many hundreds of magnitudes greater than the premium you paid. Going back to the insurance analogy, this is just like paying a $100 monthly car insurance, and then receiving the full value of your car in the event it’s totaled.

Investors need to protect their capital in the most turbulent of times, and perhaps even come out ahead. We believe, and have experienced, that “hurricanes” and “car wrecks” happen far more often in the markets than they do in other areas of insurance. Newspapers talk of a “multi-standard deviation” event, which statistically, should only happen once every ~1000 years, but happens to stock markets every few years. Accordingly, insurance must ALWAYS be in place.

And when they are in place, positive gamma options portfolios are truly all weather, and work very well alongside a long-only stock portfolio as an instrument to hedge the unknown.

For Performance/Fact Sheet and presentation material, please contact us.

11726 San Vicente Blvd. Suite 260
Los Angeles, California 90049 - MAP
For Product Specific Information Contact:
Steven Greenblatt

© 2020 by Logica

Because of the stay-at-home order and related effects of COVID-19, Logica was unable to meet the original filing deadline for its ADV, and relied on the SEC CV-19 order to file by the extended deadline.

  • LinkedIn Social Icon