DEFINITION of 'Color'
The rate at which the gamma of an option or warrant will change over time. More specifically, it is the third order derivative of an options value  once to time and twice to the option's price. Color is part of the group of measures known as the "Greeks" (other measures include delta, gamma and vega) which are used in options pricing models.
Next Up
BREAKING DOWN 'Color'
Color is used by investors who utilize a gammahedging option trading strategy, and provides the investor with information on the gamma of an option per year (the daily figure can be found by dividing the result by the number of days in the year). As the number of days left on the options contract get smaller and smaller, color becomes more volatile and less accurate.
RELATED TERMS

Gamma
The rate of change for delta with respect to the underlying asset's ... 
Speed
The rate at which the gamma of an option or warrant will change ... 
Gamma Hedging
An options hedging strategy designed to reduce or eliminate the ... 
Gamma Pricing Model
An equation for determining the fair market value of a Europeanstyle ... 
Gamma Neutral
A method of managing risk in options trading by establishing ... 
Greeks
Dimensions of risk involved in taking a position in an option ...
Related Articles

Investing
Explaining Gamma
Gamma is a measurement of how fast the delta of an option’s price changes after a 1point movement in the underlying security. 
Trading
The Forex Greeks And Strategies
We look at the different kinds of Greeks and how they can improve your forex trading. 
Trading
An Introduction To GammaDelta Neutral Option Spreads
Find the middle ground between conservative and highrisk option strategies. 
Trading
Using "The Greeks" To Understand Options
These riskexposure measurements help traders detect how sensitive a specific trade is to price, volatility and time decay. 
Trading
Getting To Know The "Greeks"
Understanding price influences on options positions requires learning about delta, theta, vega and gamma. 
Trading
Measuring Options With the Greeks
Delta, gamma, theta and vega are “the Greeks,” and they provide a way to measure the sensitivity of an option’s price. 
Trading
Using Options Tools To Trade ForeignExchange Spot
Find out how delta, gamma, risk reversals and volatility can all help predict movements in the cash market. 
Trading
The Anatomy of Options
Find out how you can use the "Greeks" to guide your options trading strategy and help balance your portfolio. 
Trading
Stock Options: What's Price Got To Do With It?
A thorough understanding of risk is essential in options trading. So is knowing the factors that affect option price.
RELATED FAQS

Is there a better metric for hedging options than delta?
Learn about delta and gamma hedging options, why gamma is a better metric to use to hedge and how gamma can be used with ... Read Answer >> 
Do options make more sense during bull or bear markets?
Understand how options may be used in both bullish and bearish markets, and learn the basics of options pricing and certain ... Read Answer >> 
How do I measure option liquidity?
An option is a financial instrument that gives the holder the right to purchase shares in a company at a certain set price ... Read Answer >> 
How can derivatives be used to earn income?
Learn how option selling strategies can be used to collect premium amounts as income, and understand how selling covered ... Read Answer >> 
What's the difference between a regular option and an exotic option?
Before learning about exotic options, you should have a fairly good understanding of regular options. Both types of options ... Read Answer >> 
How does implied volatility impact the pricing of options?
Learn about two specific volatility types associated with options and how implied volatility can impact the pricing of options. Read Answer >>