What Is "Gamma Risk" in Delta Hedging? ⎊ Path

What Is “Gamma Risk” in Delta Hedging?

Gamma Risk is the risk that a delta-neutral position will not remain delta-neutral due to changes in the underlying asset's price. Gamma measures the rate of change of Delta.

High Gamma means Delta changes quickly, forcing the trader to frequently rebalance (adjust their hedge) to maintain neutrality, which incurs transaction costs and execution risk.

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Glossar

Gamma Risk

Exposure ⎊ Gamma risk, within cryptocurrency derivatives, represents the sensitivity of an option's delta to changes in the underlying asset's price.