What it really means
If delta is the steering wheel, gamma tells you how sharply the wheel keeps turning as price moves.
Greeks
Gamma
Gamma measures how quickly delta itself changes when the underlying moves.
In one line Gamma is the speed of delta.
Greek
How fast your direction changes.
Gamma is highest near-the-money and near expiry, which is why positions can feel calm and then suddenly reactive.
Quick example
If your option delta moves from 0.40 to 0.52 after a $1 stock move, gamma is what caused that jump.
Why traders care
- High gamma makes positions change character quickly near the strike.
- Short gamma can become uncomfortable in fast-moving markets.
- Long gamma is useful around expected volatility events.
What beginners get wrong
- Ignoring how fast risk changes near expiry.
- Selling premium near the money without respecting gamma risk.
- Thinking gamma only matters to professionals.
Test Yourself
Quick Quiz
See how well you understand the term before moving on.
1 Gamma is highest for which type of options?
2 If delta moves from 0.40 to 0.55 after a $1 stock move, what caused that change?