medium · FRM Part 1

The 'Γ Rent' is a term sometimes used to describe the P&L of a market maker. For a market maker who is short options, this 'rent' is:

1. The Θ income collected which is intended to compensate for rebalancing losses.
2. The Δ gain made when the stock price moves exactly as predicted.
3. The profit made from buying options at a lower implied volatility than realized.
4. The transaction fees paid to the exchange for each Δ rebalance.

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