Gamma

The Gamma is sometimes referred to as the curvature of an option. Gamma is the rate at which an option gains or loses Deltas as the underlying contract moves up or down. The Gamma is given in Deltas-per-point-change in the underlying contract. If the underlying contract moves down, the Gamma number from the old Delta is subtracted to derive the new Delta. Conversely, if the underlying contract moves up, the Gamma number from the old Delta is added to derive the new Delta. All futures calls and puts have a positive Gamma.

All at-the-money options always have a greater Gamma than either in-the-money or out-of-the-money options with the same expiration date. As time to expiration grows shorter, or as volatility is decreased, the Gamma of at-the-money options can increase dramatically.

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