Guide · Markets
Gamma: The Options Greek That Measures How Fast Delta Changes
Delta tells you how much an option's price moves right now. Gamma tells you how much that sensitivity itself is about to shift.
Gamma measures the rate of change of an option's delta for a $1 move in the underlying asset — it's a second-order measure, describing how quickly delta itself is expected to shift, rather than describing the option's price directly the way delta does.
Gamma is highest for options that are at the money and close to expiration, and lowest for options deep in or out of the money. That makes intuitive sense: an at-the-money option sitting right on the strike price is the one whose delta can swing most dramatically with a small price move, since it's genuinely uncertain whether it will finish in or out of the money — a deep in-the-money option's delta is already close to 1 and has little room left to change, and a deep out-of-the-money option's delta is already close to 0.
High gamma cuts both ways for an option holder. It means a position's overall sensitivity to the underlying can accelerate quickly in a fast-moving market — a genuinely useful property for a buyer hoping for a big move, and a genuinely uncomfortable one for a seller who has to hedge a position whose risk profile is shifting rapidly underneath them.
This is also why options sellers talk about "gamma risk" specifically around expiration week — an at-the-money option's gamma peaks right as it's about to expire, meaning the hedging required to stay neutral can change dramatically from one day, or even one hour, to the next.