The Greeks – Gamma

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                Gamma – Measures the rate of change in the option delta due to the movement of the underlying stock price.

                Gamma is expressed as a percentage and reflects how much the delta of an option will change if the underlying stock moves up or down $1.00.  A large gamma means that your delta can start changing significantly for even a small move in the stock price. Positive gamma means that the delta will increase when the underlying stock price increases and will decrease if the stock price decreases. Negative gamma means that the delta will decrease when the underlying stock price increases and will increase if the stock price decreases. Both long calls and long puts always have positive gamma and short calls and short puts always have negative gamma. Stock has a zero gamma because its delta is always 1.00 and never changes.