Gamma is the rate of change in an option’s delta per 1-point move in the underlying asset’s price. Gamma is an important measure of the convexity of a derivative’s value, in relation to the underlying. A delta hedge strategy seeks to reduce gamma in order to maintain a hedge over a wider price range. A consequence of reducing gamma, however, is that alpha will also be reduced.
What is Gamma?
Leave a Comment / Business, Explainer, Finance / By Zaviad Team / August 27, 2021 August 27, 2021 / 1 minute of reading