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What Is the Practical Application of Gamma in Option Risk Management?

Measures the rate of change of Delta; high Gamma requires more frequent rebalancing to maintain a Delta-neutral hedge.
Greeks.Live17.11.25

What Is the Practical Application of Gamma in Option Risk Management?

Gamma is used to manage the risk that an option's Delta will change. High Gamma means the Delta will change rapidly with small moves in the underlying asset's price, requiring more frequent rebalancing for a delta-neutral portfolio.

Traders use Gamma to anticipate and manage the stability of their Delta hedge.

How Often Must a Delta-Neutral Position Be Rebalanced (Re-Hedged)?
How Does the Gamma Greek Relate to the Frequency of Rebalancing a Delta Hedge?
What Is the Significance of Gamma in Understanding the Change in an Option’s Delta?
Why Is a High Gamma Option More Difficult to Delta-Hedge than a Low Gamma Option?

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