Gamma

Gamma measures how fast delta itself changes for every $1 move in the underlying. If delta is speed, gamma is acceleration — and it is the Greek that turns a manageable position into an unmanageable one.

Why It Matters

A position with high gamma sees its directional exposure shift rapidly. A short option that looked comfortably out of the money on Monday can carry serious directional risk by Wednesday without you having traded anything. That drift is gamma at work, and it is the single most common reason premium sellers get hurt.

Where Gamma Concentrates

Gamma is highest for at-the-money options and grows dramatically as expiration nears. A 45-day at-the-money option has moderate gamma; the same strike with 2 days left has enormous gamma. This is the mathematical reason behind the widely used rule of managing short-premium positions at 21 days to expiration rather than holding them to the end.

Long Gamma vs Short Gamma

Long gamma — from buying options — means your delta improves as the market moves your way and hurts you less when it moves against you. It is convexity, and you pay for it through theta. Short gamma — from selling options — means the opposite: every move works against you at an accelerating rate, and you are compensated for that with the premium you collected.

Gamma Scalping

Long-gamma positions can be monetised by repeatedly rebalancing delta: buying the underlying as it falls and selling as it rises, capturing small profits from the movement itself. The strategy works when realised volatility exceeds the implied volatility paid for the options, and loses to theta when it does not.