# Using limit orders or stop orders and gamma

From Dynamic Hedging by Taleb:

Risk Management Rule: Option trader lore states that when long gamma, use limit orders. When short gamma, use stop orders.

I cannot understand why this is and the book gives no justification.

An important theme in N. Taleb's book(s) is that being short gamma is a dangerous situation, in the sense that you are subject to occasional very sharp losses, losses that could put you out of business or at least be very painful. You do make frequent small gains, but these are of less concern. (Recall that the P&L of an option when the underlying changes by $\Delta S$ can be approximated by a linear term $\delta \Delta S$ plus a quadratic term $\frac{1}{2} \gamma (\Delta S)^2$. This last term is important when $\Delta S$ is large and will be negative when gamma is negative, i.e. you are short the option). The author returns to this theme of dangerous gamma and illustrates it in many different ways.