What Is the Role of Gamma Hedging in Managing the Risk of a Quoted Options Book?

Gamma is a "Greek" that measures the rate of change of an option's Delta relative to the underlying asset's price. High gamma exposure means the portfolio's delta changes rapidly with price movement, requiring frequent and precise re-hedging.

Gamma hedging involves executing trades in the underlying asset to keep the portfolio's delta neutral, thus minimizing the risk from large, sudden price moves.