How Does ‘Gamma’ Relate to and Affect an Option’s Delta?
Gamma is the second-order option Greek that measures the rate of change of an option's delta with respect to a change in the underlying asset's price. Essentially, gamma tells you how much the delta will change as the underlying price moves.
High gamma means the delta will change rapidly, making the option's position highly sensitive to small price movements. Gamma is highest for at-the-money options and decreases as options move deep in-the-money or far out-of-the-money.
Glossar
Rate of Change
Momentum ⎊ Rate of Change, within cryptocurrency, options, and derivatives, quantifies the velocity of price movements, serving as a core component in trend identification and predictive modeling.
Gamma
Parameter ⎊ Representing the second derivative of an option's price with respect to the underlying asset price, this Greek measures the rate of change of Delta, indicating how quickly the hedge ratio needs to be adjusted.
Delta
Parameter ⎊ In options theory, this measures the rate of change of an option's price relative to a one-unit change in the price of the underlying asset, often termed the first derivative of the option price with respect to the asset price.