page_title: Greeks (finance)
section_title: Gamma
hierarchical_section_title: Greeks (finance) / Second-order Greeks / Gamma
caption_attribution_description: English: A graph showing the relationship between long option delta, underlying price, and Gamma
context_page_description: In mathematical finance, the Greeks are the quantities representing the sensitivity of the price of derivatives such as options to a change in underlying parameters on which the value of an instrument or portfolio of financial instruments is dependent. The name is used because the most common of these sensitivities are denoted by Greek letters. Collectively these have also been called the risk sensitivities, risk measures or hedge parameters.
context_section_description: Gamma, , measures the rate of change in the delta with respect to changes in the underlying price. Gamma is the second derivative of the value function with respect to the underlying price. 
  
  Most long options have positive gamma and most short options have negative gamma. Long options have a positive relationship with gamma because as price increases, Gamma increases as well, causing Delta to approach 1 from 0 (long call option) and 0 from -1 (long put option). The inverse is true for short options.
   Gamma is greatest approximately at-the-money (ATM) and diminishes the further out you go either in-the-money (ITM) or out-of-the-money (OTM). Gamma is important because it corrects for the convexity of value.
  When a trader seeks to establish an effective delta-hedge for a portfolio, the trader may also seek to neutralize the portfolio's gamma, as this will ensure that the hedge will be effective over a wider range of underlying price movements.
caption: Long option delta, underlying price, and gamma.[12]
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