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Gamma

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Gamma
The rate of change in the Delta of an Option for a small change in the Underlying. The rate of change is greatest when an Option is At-the-money and decreases as the price of the Underlying moves further away from the Strike Price in either direction. A Long gamma Position is one in which a trader is Long options. For a Position that is Short gamma, the opposite holds. Gamma can be hedged by mirroring theoptions Position. Alternatively, a trader may choose to adjust the Position in the Underlying continually in order to maintain Delta neutrality.

See also Vega
Posted by  Privatebanking.com
 
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