Greeks
Gamma
Gamma measures how fast delta changes for a $1 move in the underlying. It is highest for at-the-money options close to expiration; long options always have positive gamma and short options negative gamma.
Gamma is the curvature in an option's payoff. A long call with a delta of 0.50 and gamma of 0.05 becomes a 0.55-delta call after a $1 rally, so profits accelerate as the move continues. Short gamma positions face the opposite: losses accelerate, and staying hedged means buying strength and selling weakness.
Gamma concentrates near the strike and near expiration, which is why 0DTE and weekly options produce violent delta swings. Aggregated across all open contracts and weighted by open interest, gamma becomes gamma exposure (GEX), a market-structure estimate of how dealer hedging may dampen or amplify moves.
Formula
Gamma = ∂Delta / ∂S = ∂²V / ∂S²
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Frequently asked questions
Why is gamma highest at the money near expiration?
With little time left, a small move decides whether the option finishes worthless or worth its intrinsic value, so delta must jump from near 0 to near 1 across a narrow price range. That steep slope is high gamma.
What is a gamma squeeze?
Heavy call buying forces dealers who sold the calls to buy stock as it rises to stay hedged. Their buying pushes price higher, raising delta and requiring more buying: a feedback loop driven by dealers being short gamma.