# Define Gamma Risk and Its Implication for Market Makers during a Crash ⎊ Path

**Published:** 2025-12-05
**Author:** Greeks.live
**Categories:** Path

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## Define Gamma Risk and Its Implication for Market Makers during a Crash.

Gamma risk is the risk associated with the rate of change of an option's Delta relative to the underlying asset's price. When Gamma is high, Delta changes rapidly, forcing market makers to execute large, frequent trades to maintain a Delta-neutral hedge.

During a crash, high Gamma and high volatility necessitate aggressive selling of the underlying asset as prices fall, which amplifies the market's downward momentum.

- [What Is ‘Gamma’ and Why Is a High-Gamma Position Sensitive to Small Price Movements?](https://learn.greeks.live/path/what-is-gamma-and-why-is-a-high-gamma-position-sensitive-to-small-price-movements/)

- [How Does “Negative Gamma” Contribute to Market Instability?](https://learn.greeks.live/path/how-does-negative-gamma-contribute-to-market-instability/)

- [What Is the Role of Gamma Hedging in Managing the Risk of a Quoted Options Book?](https://learn.greeks.live/path/what-is-the-role-of-gamma-hedging-in-managing-the-risk-of-a-quoted-options-book/)

- [What Is ‘Gamma Risk’ and How Is It Managed?](https://learn.greeks.live/path/what-is-gamma-risk-and-how-is-it-managed/)

- [What Is the Practical Implication of High Gamma for a Market Maker in Volatile Crypto Options?](https://learn.greeks.live/path/what-is-the-practical-implication-of-high-gamma-for-a-market-maker-in-volatile-crypto-options/)

- [What Is “Gamma Risk” for Options Sellers and How Does It Complicate Hedging Strategies during Volatile Periods?](https://learn.greeks.live/path/what-is-gamma-risk-for-options-sellers-and-how-does-it-complicate-hedging-strategies-during-volatile-periods/)

- [What Does an Option’s Gamma Measure and Why Is It Crucial for Delta Hedging?](https://learn.greeks.live/path/what-does-an-options-gamma-measure-and-why-is-it-crucial-for-delta-hedging/)

- [What Is “Gamma Risk” and How Does It Relate to Delta Hedging during High Volatility?](https://learn.greeks.live/path/what-is-gamma-risk-and-how-does-it-relate-to-delta-hedging-during-high-volatility/)

## Glossar

### [Gamma Risk](https://learn.greeks.live/area/gamma-risk/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Exposure ⎊ Gamma risk, within cryptocurrency derivatives, represents the sensitivity of an option's delta to changes in the underlying asset's price.

### [Market Makers](https://learn.greeks.live/area/market-makers/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Function ⎊ Market Makers in cryptocurrency, options, and derivatives markets actively provide liquidity by simultaneously offering to buy and sell assets, narrowing bid-ask spreads and facilitating efficient price discovery.

## Discover More

### [What Are 'Vega' and 'Gamma' and How Do They Relate to Options Positions during a high-IV Event?](https://learn.greeks.live/path/what-are-vega-and-gamma-and-how-do-they-relate-to-options-positions-during-a-high-iv-event/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Are 'Vega' and 'Gamma' and How Do They Relate to Options Positions during a high-IV Event?](https://learn.greeks.live/wp-content/uploads/2025/10/Crystalline-Structured-Financial-Instrument-Piercing-Reflective-Dualistic-Prismatic-Surface-Domain.webp)

Vega measures sensitivity to IV; Gamma measures Delta's rate of change. High IV means large Vega swings and high Gamma requires costly re-hedging.

### [Define "Greeks" (Delta, Gamma, Vega, Theta, Rho) and Their Importance in Options Risk Management](https://learn.greeks.live/path/define-greeks-delta-gamma-vega-theta-rho-and-their-importance-in-options-risk-management/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Define "Greeks" (Delta, Gamma, Vega, Theta, Rho) and Their Importance in Options Risk Management](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Finance-Derivatives-Engineering-Quantum-Entanglement-in-Volatility-Surface-Modeling.webp)

Measures of an option's price sensitivity to underlying factors like asset price, volatility, and time decay.

### [What Role Do Market Makers Play in Setting the Bid-Offer Spread in a Volatile Options Market?](https://learn.greeks.live/path/what-role-do-market-makers-play-in-setting-the-bid-offer-spread-in-a-volatile-options-market/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Role Do Market Makers Play in Setting the Bid-Offer Spread in a Volatile Options Market?](https://learn.greeks.live/wp-content/uploads/2025/10/Complex-High-Fidelity-Simulation-of-Tokenized-Asset-Winglet-Actuator-Dynamics-For-Option-Hedging-Strategies.webp)

They provide liquidity and widen the spread to compensate for the increased inventory risk and uncertainty caused by high volatility.

### [What Is the Implication of Backwardation for the Future Price Movement of a Cryptocurrency?](https://learn.greeks.live/path/what-is-the-implication-of-backwardation-for-the-future-price-movement-of-a-cryptocurrency/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Implication of Backwardation for the Future Price Movement of a Cryptocurrency?](https://learn.greeks.live/wp-content/uploads/2025/10/Aerodynamic-Unfolding-Mechanism-Representing-Modular-Digital-Asset-Settlement-Infrastructure-Evolution.webp)

Backwardation suggests bearish sentiment and an expectation of future price decline, or high immediate spot demand.

### [What Is the Financial Implication of an ASIC Production Ban on the Secondary Market for Used Hardware?](https://learn.greeks.live/path/what-is-the-financial-implication-of-an-asic-production-ban-on-the-secondary-market-for-used-hardware/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Financial Implication of an ASIC Production Ban on the Secondary Market for Used Hardware?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Engineering-of-Digital-Asset-Volatility-Management-Through-Spherical-Interface-Mechanisms.webp)

Halts new supply, increasing the demand and sustaining the price of existing used ASICs in the secondary market.

### [How Do Automated Market Makers (AMMs) in Options Trading Handle Liquidity Risk?](https://learn.greeks.live/path/how-do-automated-market-makers-amms-in-options-trading-handle-liquidity-risk/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Do Automated Market Makers (AMMs) in Options Trading Handle Liquidity Risk?](https://learn.greeks.live/wp-content/uploads/2025/10/Conceptualization-of-Interconnected-Algorithmic-Liquidity-Swaps-Across-Decentralized-Exchange-Protocols.webp)

AMMs use liquidity pools funded by LPs and algorithmic pricing to ensure a continuous counterparty is available for trades.

### [Explain the Concept of a "Negative Gamma" Scenario for Market Makers](https://learn.greeks.live/path/explain-the-concept-of-a-negative-gamma-scenario-for-market-makers/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Explain the Concept of a "Negative Gamma" Scenario for Market Makers](https://learn.greeks.live/wp-content/uploads/2025/10/Cryptocurrency-Decentralized-Autonomous-Organization-Governance-Orb-Navigating-Volatility-Index-Debris-Fields.webp)

Being net short options, forcing MMs to buy low and sell high, which can exacerbate price moves if hedging is slow.

### [What Is a 'Level 2' Order Book and Why Is It Important for Market Makers?](https://learn.greeks.live/path/what-is-a-level-2-order-book-and-why-is-it-important-for-market-makers/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is a 'Level 2' Order Book and Why Is It Important for Market Makers?](https://learn.greeks.live/wp-content/uploads/2025/10/Spherical-Ocular-Sensor-Modeling-Algorithmic-Execution-in-Decentralized-Derivatives-Markets.webp)

It shows bids and asks beyond the best price, crucial for market makers to estimate slippage and price large options/hedges accurately.

### [What Is the Legal Implication of a Token Being Deemed a "Hybrid Token"?](https://learn.greeks.live/path/what-is-the-legal-implication-of-a-token-being-deemed-a-hybrid-token/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Legal Implication of a Token Being Deemed a "Hybrid Token"?](https://learn.greeks.live/wp-content/uploads/2025/10/Abstract-Visualization-of-Volatility-Skew-and-Implied-Volatility-Surface-Dynamics-in-Decentralized-Finance-Instruments.webp)

A hybrid token is legally treated as a security, subjecting the issuer to full securities regulation due to its investment characteristics.

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**Original URL:** https://learn.greeks.live/learn/define-gamma-risk-and-its-implication-for-market-makers-during-a-crash/
