Options

Gamma

An estimate of how an option’s delta may change when the underlying price changes.

Plain-English context

Put the definition to work.

ILLUSTRATIVE EXAMPLE

A call's estimated delta may rise as the underlying rises; gamma measures that local change in delta, holding the model's other inputs constant.

IMPORTANT DISTINCTION

Gamma changes with price, time and volatility. A local delta-change estimate cannot be extrapolated unchanged across a large move.

Further reading and verification. Examples are hypothetical, not current quotes or recommendations. Product terms, tax treatment and market rules can change. OCC / Options Industry Council — options basics

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