DEFINITION of 'Gamma'
The rate of change for delta with respect to the underlying asset's price. Gamma is an important measure of the convexity of a derivative's value, in relation to the underlying. In a deltahedge strategy, gamma is sought to be reduced in order to maintain a hedge over a wider price range. A consequence of reducing gamma, however, is that alpha too will be reduced.
INVESTOPEDIA EXPLAINS 'Gamma'
Mathematically, gamma is the first derivative of delta and is used when trying to gauge the price movement of an option, relative to the amount it is in or out of the money. When the option being measured is deep in or out of the money, gamma is small. When the option is near or at the money, gamma is at its largest. Gamma calculations are most accurate for small changes in the price of the underlying asset.

Zomma
An options greek used to measure the change in gamma in relation ... 
Color
The rate at which the gamma of an option or warrant will change ... 
Delta Neutral
A portfolio consisting of positions with offsetting positive ... 
Option
A financial derivative that represents a contract sold by one ... 
Lambda
The ratio of the percentage change in an option contract's price ... 
Delta
The ratio comparing the change in the price of the underlying ...

What are the most common interview questions for banking / finance jobs?
Interviews for banking and finance positions are notoriously tough. Interviewees can expect all the questions from a normal ... Read Full Answer >> 
Is there a better metric for hedging options than delta?
Delta hedging is a way traders mitigate risk in their positions by taking an offsetting position. Although it is a common ... Read Full Answer >> 
What is the difference between open interest and volume?
In the options market, two measurements describe the liquidity and activity of option contracts. Volume is the amount of ... Read Full Answer >> 
What does a rising open interest on a stock signal?
An increasing open interest indicates there are new option contracts on a stock being bought to open, and there is money ... Read Full Answer >> 
What options strategies are best suited for investing in the chemicals sector?
The best option strategy for investing in the chemicals sector depends on which segment is being utilized. The chemicals ... Read Full Answer >> 
How is the spot price related to a derivative's notional value?
A derivative's notional value is directly related to the spot price of the security. To calculate the total value of a derivative ... Read Full Answer >>

Options & Futures
An Introduction To GammaDelta Neutral Option Spreads
Find the middle ground between conservative and highrisk option strategies. 
Options & Futures
Getting To Know The "Greeks"
Understanding price influences on options positions requires learning about delta, theta, vega and gamma. 
Options & Futures
Options Trading Strategies: Understanding Position Delta
Learn more about the position delta hedge ratio and how it can tell you the number of contracts needed to hedge a position in the underlying asset. 
Options & Futures
Using "The Greeks" To Understand Options
These riskexposure measurements help traders detect how sensitive a specific trade is to price, volatility and time decay. 
Options & Futures
Option Spread Strategies
Learn why option spreads offer trading opportunities with limited risk and greater versatility. 
Investing Basics
Understanding Notional Value
This term is commonly used in the options, futures and currency markets because a very small amount of invested money can control a large position. 
Options & Futures
The Risks Of Writing Covered Calls
While writing a covered call option is less risky than writing a naked call option, the strategy is not entirely riskfree. 
Options & Futures
How Low Can Oil Prices Go?
Record low oil prices are a welcome development for consumers, but oil companies are struggling with choosing market share over profitability. 
Options & Futures
SECRegulated Options Brokers
Investopedia provides a List Of SECRegulated Options Brokers 
Options & Futures
How To Trade Orange Juice Options
How do orange juice options work and which factors determine the orange juice valuations? Here's a sneak peak into the world of orange juice options.