Derivatives & Risk

What is gamma in options trading?

Gamma in options trading measures how fast an option's delta changes as the underlying price moves. It is the rate of change of delta, so high gamma means delta shifts quickly and the position's directional exposure can swing sharply. Gamma is largest for at-the-money options near expiry. For example, if a call has a delta of 0.50 and a gamma of 0.10, a one-dollar rise lifts delta to roughly 0.60. Traders watch gamma because it makes hedging harder near expiration. Options are advanced and can result in total loss.

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