Explain the Concept of “Delta-Neutral” Position and How Gamma Affects Its Stability

A Delta-neutral position is a portfolio of options and/or the underlying asset structured so that the total Delta is zero. This means the portfolio's value should theoretically not change with small movements in the underlying asset's price.

Gamma affects stability because it measures how quickly the Delta moves away from zero. High Gamma means the position's Delta will quickly become non-zero, requiring frequent re-hedging to maintain neutrality.