|
Option Gamma is the change in an option’s delta
for a one-point change in the price of the underlying.
The option gamma of a long option position (both calls and
puts) is always positive. This means that the delta increases
as the underlying price increases and that delta falls as
the underlying price falls.
At-the-money options have the largest gamma. The further an option goes in-the-money or, out-of-the-money the smaller is gamma.
Gamma Option and Time to expiration
As time passes, the gamma of at-the-money options increases, the gamma of deep in-the-money and out-of-the-money options decreases.
Gamma Option and Volatility
As volatility falls, the gamma of at-the-money options increases, the gamma of deep in-the-money and out-of-the-money options decreases.
|
