The profit and loss of an options trading strategy can be path-dependent, meaning that interim price movements, not just the final outcome, significantly influence profits and losses due to factors like dynamic hedging, early exercise risk, and volatility shifts.
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Reducing Path Dependency in Options PnL
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The profit and loss of an options trading strategy can be path-dependent, meaning that interim price movements, not just the final outcome, significantly influence profits and losses due to factors like dynamic hedging, early exercise risk, and volatility shifts.