How Does the Concept of ‘Gamma’ Relate to the Re-Hedging Frequency of a Delta-Neutral Position?

Gamma measures the rate of change of an option's delta with respect to the underlying asset's price. High gamma means the delta changes rapidly, requiring more frequent re-hedging to maintain the delta-neutral state.

Market makers prefer to manage gamma risk carefully. Options that are near-the-money and close to expiration typically have the highest gamma, demanding constant attention and rebalancing.