Define ‘Short Gamma’ in the Context of Options Trading and Its Risk Profile

Short gamma is the position of an option seller (writer) who benefits from the underlying asset's price staying stable. Gamma measures the rate of change of an option's delta.

Being short gamma means that as the underlying asset moves sharply in either direction, the delta of the short option position rapidly approaches 1 or -1. This forces the seller to buy high and sell low to maintain a delta-neutral hedge, which is the risk.