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. Gamma

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

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

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

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

    1. A statistical measure of the dispersion of returns for a given ...
  6. Option

    A financial derivative that represents a contract sold by one ...
Related Articles
  1. An Introduction To Gamma-Delta Neutral ...
    Options & Futures

    An Introduction To Gamma-Delta Neutral ...

  2. The Importance Of Time Value In Options ...
    Options & Futures

    The Importance Of Time Value In Options ...

  3. Option Price-Volatility Relationship: ...
    Options & Futures

    Option Price-Volatility Relationship: ...

  4. Options Risk Graphs: Visualizing Profit ...
    Options & Futures

    Options Risk Graphs: Visualizing Profit ...

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center