Quick Definition

Gamma is a measure of the rate of change in an option's delta for a one-point increase in the price of the underlying asset.

Formula

Examples

• 1A stock option with high gamma will experience a larger change in delta if the stock price moves up by $1.
• 2During periods of high market volatility, options with high gamma can significantly increase in value due to rapid changes in delta.
• 3Gamma decreases as an option approaches expiration, making it crucial for options traders to manage their positions closely during this time.

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