Explain the Concept of Gamma and Its Relationship to an Option’s Delta

Gamma is the second-order derivative of the option price with respect to the underlying asset's price; it measures the rate of change of Delta. Essentially, Gamma tells you how much Delta will change for a $1 move in the underlying asset.

High Gamma means Delta is very sensitive to price changes, which is typically true for At-the-Money (ATM) options. Low Gamma means Delta is stable, which is true for deep ITM or OTM options.

Gamma is crucial for dynamic hedging strategies, as it indicates the frequency required to rebalance a Delta-hedged position.