Why Is Gamma Highest for At-the-Money Options?
At-the-money (ATM) options have the highest Gamma because their Delta is near 0.50, meaning they are on the cusp of becoming ITM or OTM. A small change in the underlying price causes a large, rapid shift in the probability of the option expiring ITM, resulting in the most significant change in Delta.
ITM or OTM options have Deltas already near their limits (1 or 0), so their Gamma is low.
