GLOSSARY // Options
Gamma
Gamma is the rate at which delta changes per $1 move in the stock — the acceleration behind delta's speed. An option with a 0.50 delta and 0.08 gamma has a 0.58 delta after the stock rises $1, and 0.42 after it falls $1.
Gamma is highest for at-the-money options close to expiration, which is why 0DTE contracts can flip from lottery ticket to stock-substitute within an hour. It also drives market-wide feedback loops: dealers short calls must buy stock as it rises to stay hedged, the mechanism underneath a gamma squeeze.
An ATM call on a $100 stock has delta 0.50 and gamma 0.08. The stock jumps to $102: delta walks up to roughly 0.66, so the third dollar of upside pays the call holder about $0.66 instead of the $0.50 the first one did. Long options get longer as they win — that convexity is gamma.
Related terms
Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.