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How fast delta changes when the stock moves. The acceleration of delta.
Why It Matters
Gamma is delta's rate of change. High gamma means your delta swings wildly with small stock moves - great when you're right, devastating when you're wrong. ATM options near expiration have the highest gamma, making them the most volatile and unpredictable.
Key Points
- Gamma is highest for ATM options and increases as expiration approaches
- High gamma = high risk/reward; positions can explode in value or go to zero quickly
- Option sellers fear 'gamma risk' - sudden moves can turn small losses into big ones
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Common Questions
How fast delta changes when the stock moves. The acceleration of delta. Gamma is delta's rate of change. High gamma means your delta swings wildly with small stock moves - great when you're right, devastating when you're wrong.
Gamma is delta's rate of change. High gamma means your delta swings wildly with small stock moves - great when you're right, devastating when you're wrong. ATM options near expiration have the highest gamma, making them the most volatile and unpredictable.
Gamma is highest for ATM options and increases as expiration approaches
High gamma = high risk/reward; positions can explode in value or go to zero quickly
Option sellers fear 'gamma risk' - sudden moves can turn small losses into big ones