Options & Derivatives

Gamma

The rate of change of delta with respect to the underlying price - the curvature of the option payoff.

Long gamma means you get longer as the market rises and shorter as it falls - automatically positioned in the direction of the move. That is convexity, and it is why owning options profits from movement in either direction.

Short gamma inverts it: you are positioned wrongly both ways.

Highest at the money and near expiry, where a small move flips an option between in and out of the money.

What you pay for it: theta. Gamma profit tracks realised volatility; theta cost tracks implied.

Full guide

Gamma and Convexity

Why owning options means profiting from movement, and why gamma is what you actually pay for with time decay.

Related terms

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