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Gamma
Rate of delta change
What is Gamma?
Gamma Measures how fast delta changes for a $1 move in the underlying. High gamma means delta shifts quickly. ATM options near expiration have the highest gamma.
Complete Definition
Measures how fast delta changes for a $1 move in the underlying. High gamma means delta shifts quickly. ATM options near expiration have the highest gamma.
Example
Call has 0.50 delta and 0.05 gamma. After a $1 up move, delta becomes 0.55.
Formula
Gamma = Change in Delta / Change in Stock Price
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