What Is ‘Gamma Risk’ and How Is It Managed?

Gamma risk is the risk associated with the rate of change of an option's Delta. Gamma is highest for at-the-money options and near expiration.

High Gamma means Delta changes rapidly as the underlying price moves, requiring frequent and costly adjustments to maintain a Delta-neutral hedge. It is managed by either avoiding high-gamma positions or by trading options to offset the Gamma exposure, often by selling or buying options with opposite Gamma signs.