DEFINITION of 'Gamma Neutral'
A method of managing risk in options trading by establishing an asset portfolio whose delta rate of change is zero. A gammaneutral portfolio hedges against secondorder time price sensitivity. Gamma is one of the "options Greeks" along with delta, rho, theta and vega. These are used to assess different types of risk in options portfolios. The risk level of an options portfolio could also be managed through delta neutral, theta neutral and vega neutral strategies, which are used to hedge against the risks of price sensitivity, time sensitivity and implied volatility.
BREAKING DOWN 'Gamma Neutral'
A gamma neutral portfolio can be created by taking positions with offsetting deltas. This helps to reduce variations due to changing market prices and conditions. A gamma neutral portfolio is still subject to risk, however. For example, if the assumptions used to establish the portfolio turn out to be incorrect, a position that is supposed to be neutral may turn out to be risky. Furthermore, the position has to be rebalanced as prices change and time passes.

Gamma Hedging
Gamma hedging is an options hedging strategy designed to reduce, ... 
Greeks
Dimensions of risk involved in taking a position in an option ... 
Delta Neutral
Delta neutral is a portfolio strategy consisting of positions ... 
Speed
The rate at which the gamma of an option or warrant will change ... 
Theta
A measure of the rate of decline in the value of an option due ... 
Delta Hedging
An options strategy that aims to reduce (hedge) the risk associated ...

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