How Does a High Gamma Affect the Risk Profile of a Short Option Position?

A short option position (selling calls or puts) has negative Gamma. High negative Gamma significantly increases the risk profile of the position.

This is because as the underlying price moves against the trader, the Delta of the position accelerates, requiring larger and more frequent adjustments to maintain a Delta-neutral hedge. The trader must buy high and sell low to rebalance, which leads to negative P&L from hedging.

High negative Gamma means the position is vulnerable to rapid and large losses if the market moves quickly.