Option Gamma

What Option Gamma Is

Gamma, one of option Greeks, measures sensitivity of delta to changes in the underlying price.

Mathematically, gamma is the second derivative of option’s price with respect to underlying price.

Option Gamma Interpretation

The number you see as gamma shows how much the option’s delta changes when the underlying price rises by 1.

The units are same as underlying price (for example dollars per share).

Value Range of Option Gamma

Gamma can only reach positive values for long option positions; negative for short.

It is highest approximately (but not necessarily exactly) at the money and converges to zero on both tails (far out of the money and deep in the money).