Zomma

AAA

DEFINITION of 'Zomma'

An options greek used to measure the change in gamma in relation to changes in the volatility of the underlying asset. Zomma, though considered a third level greek, is a first derivative of volatility, a second degree derivative of an underlying asset and third as it is related to the value of that underlying asset.

INVESTOPEDIA EXPLAINS 'Zomma'

Options traders and risk managers most often use a measure of zomma to determine the effectiveness of a gamma hedged portfolio. Zomma's measure will be a measure against the change in volatility of the portfolio, or underlying assets of the portfolio.


Also known as DgammaDvol.

RELATED TERMS
  1. Rho

    The rate at which the price of a derivative changes relative ...
  2. Gamma

    The rate of change for delta with respect to the underlying asset's ...
  3. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  4. Greeks

    Dimensions of risk involved in taking a position in an option ...
  5. Vega

    The measurement of an option's sensitivity to changes in the ...
  6. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
Related Articles
  1. Options & Futures

    An Introduction To Gamma-Delta Neutral Option Spreads

    Find the middle ground between conservative and high-risk option strategies.
  2. Options & Futures

    The Importance Of Time Value In Options Trading

    Move beyond simply buying calls and puts, and learn how to turn time-value decay into potential profits.
  3. Options & Futures

    Option Price-Volatility Relationship: Avoiding Negative Surprises

    Learn about the price-volatility dynamic and its dual effect on option positions.
  4. Options & Futures

    Options Risk Graphs: Visualizing Profit Potential

    With a single diagram, you can see how price, time and volatility affect potential gains.
  5. Options & Futures

    Volatility Index Uncovers Market Bottoms

    VIX can gauge when the market has hit bottom - a welcome sign of better things to come.
  6. Options & Futures

    What is spread hedging?

    Learn about one of the most common risk-management strategies options traders use, called spread hedging, to limit exposure to harmful stock movements.
  7. Options & Futures

    What role does intrinsic value play in put options?

    See why the concept of intrinsic value is so important in options trading and how investors use it to evaluate the worth of their options contract.
  8. Options & Futures

    What are the most common momentum oscillators used in options trading?

    Read about some of the most common technical momentum oscillators that options traders use, and learn why momentum is a critical concept for options trading.
  9. Options & Futures

    How are Bollinger BandsĀ® used in options trading?

    Use Bollinger Bands to identify volatility changes and place options trades at the right time; profit in bull or bear markets using these strategies.
  10. Options & Futures

    Stock Futures vs Stock Options

    A full analysis of when is it better to trade stock futures vs when is it better to trade options on a particular stock. A quick overview of how each of them works and why would a trader, investor, ...

You May Also Like

Hot Definitions
  1. Christmas Tree

    An options trading strategy that is generally achieved by purchasing one call option and selling two other call options at ...
  2. Christmas Club

    A short-term savings account that usually pays out the full account balance to its account holders once each year, right ...
  3. Boston Snow Indicator

    A market theory that states that a white Christmas in Boston will result in rising stock prices for the following year. For ...
  4. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  5. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  6. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
Trading Center