Suppose a trader has bought a call and will attempt to follow the gamma scalping strategy. What if the price moves a lot between trade inception and option expiry, but does so in a straight line, will the trader be able to earn the gamma profit??

no - I shouldn't think so

Why ? Could you please explain.

From my experience, the best scenario for a trader to profit from gamma scalping is when the spot either moves sharply in a range (and then the trader can end up with a "free" option, after the gamma profits paid the premium) or when the spot moves sharply in one direction but retract after every major move.Actually, i can give you a good example to a recent situation where i should have made a lot of money but ended up with a very modest profit. At the beginning of July i bought an 3M ATM Aussie Call/Dollar Put (K=0.8675). During the first 2months the price went up and down (so i made very nice rounds on the gamma, and paid a very decent of the premium). Thing is that since the beginning of September the Aussie made a very sharp move to the upside, without any corrections. Because i sold all the way up (to be honest, i was net long all the way up, as this was my strategy), i couldn't buy the delta (because the average was always lower than the current level). To make long story short, last week i closed the position when i made a 1100pips profit on the option but lost 500pips on the hedge.

Thanks VolMaster. Nice trade.I'm still unable to clearly reason in my head why is it that the gamma scalping will not work in this case. Could you please break down the second last line you wrote.

As we explain in our book (but by no means claim credit for the idea) in chapter 22, the PNL of a hedged option (or option book) on the underlying S(t) for a given path is equal to \int_0^T (\sigma_BS^2 - \sigma(t)^2) S(t)^2 \Gamma(t) dtwhere \sigma_BS is the implied vol you bought your option at, and sigma(t) is the realized volatility path. Gamma(t) is the gamma of the book. to the extent that the realized vol sigma(t) is different from implied sigma_BS you will make or lose money with "gamma scalping"Vladimir

I can see that the mathematical side of the proof is covered, so i'll give you my two cents regarding the reason a directional move should not benefit a "gamma scalping" strategy.As you know vanilla options have a negative time-decay (yes, i know, except for deep ITM puts with a significant forward points) so in order for you to profit from the option you need to cover the daily decay (by trading the spot against the option). Say you just bought a 1month EURUSD ATM Call (for the sake of the example, let's make it a 50 delta). Hypothetically, you need to sell 50% of the notinal to be hedged against the movement of the spot. Say you sold 50% of the notional (in the spot market) the moment you bought the option (let's make it 1.39), after a day the market went up to 1.4 (let's make it a move to 60Delta). Now you need to sell another 10% of the notional (remember, we are now at 1.4). During these two days you sold 60% of the ntional at an average rate of 1.3917. The total P&L of your strategy after two days is Option (the Mark-to-Market is up by 0.4%) + Delta (you are in loss of 0.5%) = Total loss of 0.1%. Actually, if the price keeps on going up without any downward correction, you will always average a sell price lower than the spot, and will never be able to have gamma profit (this is why directional trades are not very good gamma scalping). You other choice is not to hedge the entire delta, but then you be net long (or short, depends on you position) the underlying asset.Hope the explanation helped a bit.