Brian Lee
Aug 12, 2025
Part of: Option
Greeks
Option gamma tracks how quickly an option’s Option Delta changes when the underlying price moves. It is the second derivative of option price with respect to the underlying, so higher gamma means delta can shift rapidly over small price changes. Mathematically, gamma is the second partial derivative of the option price (V) with respect to the underlying price (S):
\[ \Gamma = \frac{\partial^2 V}{\partial S^2} \]
Gamma peaks for at-the-money options and rises as expiration nears. Traders monitoring gamma can anticipate how aggressively they may need to rebalance hedges if the stock moves. Combined with Option Theta, gamma highlights the dynamic nature of an option’s risk profile.