DEFINITION of 'Speed'
The rate at which the gamma of an option or warrant will change in relation to underlying price in the underlying market. More specifically, it is the third order derivative of an options value to price. A high speed value indicates that gamma is more sensitive to moves in price of the underlying asset.
INVESTOPEDIA EXPLAINS 'Speed'
Speed is used by investors who utilize both deltahedging and gammahedging option trading strategies, and provides the investor with information on the vega or delta 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, charm becomes more volatile and less accurate.
RELATED TERMS

Delta
The ratio comparing the change in the price of the underlying ... 
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The rate of change for delta with respect to the underlying asset's ... 
Time Decay
The ratio of the change in an option's price to the decrease ... 
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Dimensions of risk involved in taking a position in an option ... 
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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 >> 
What are some common markets where notional value is used?
Notional value is commonly used in futures and swap markets. The notional value is the total net amount of derivative contracts, ... Read Full Answer >> 
What options strategies are commonly used for investing in the electronics sector?
The long straddle and long strangle option strategies take advantage of the electronic sector's cyclical nature. Both strategies ... Read Full Answer >>
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