This is actually a follow-up questions for the two threads below - value of a delta hedged option:
My question is that how the drift (mu) impact this hedged portfolio. In Paul Wilmott's book, he comments that “if we start off at the money ad the drift is very large (positive or negative), we will find ourselves quickly moving into territory where gamma, and hence the hedged portfolio value, is small. The best that could happen would be for the stock to end up close to the strike at expiration, this would maximize the total profit."
Can someone help to explain why? Thank you so much in advance.