At-the-money options have the largest gamma

Gamma Option
Option Gamma is the change in an option’s delta for a one-point change in the price of the underlying.
The option gamma of a long option position (both calls and puts) is always positive. This means that the delta increases as the underlying price increases and that delta falls as the underlying price falls.
At-the-money options have the largest gamma. The further an option goes in-the-money or, out-of-the-money the smaller is gamma.

Gamma Option and Time to expiration
As time passes, the gamma of at-the-money options increases, the gamma of deep in-the-money and out-of-the-money options decreases.

Gamma Option and Volatility
As volatility falls, the gamma of at-the-money options increases, the gamma of deep in-the-money and out-of-the-money options decreases.

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• As volatility falls,the gamma of deep in-the-money and out-of-th -marketreflections- ♂ (329 bytes) () 07/24/2010 postreply 18:06:51

• spot movement is increasingly driven by what goes on in the opti -marketreflections- ♂ (5862 bytes) () 07/24/2010 postreply 18:15:19