Gamma: The Nitro Boost
If Delta is "Speed", Gamma is "Acceleration". It measures how fast Delta changes when the market moves.
Why Gamma Matters?
Have you ever bought an option at ₹20, and Nifty moved up just 50 points, and suddenly your option is at ₹80?
That's Gamma.
The "Gamma Blast" Zone
Gamma is highest for ATM (At-The-Money) options, especially close to expiry.
- Low Gamma (Far OTM): Delta doesn't change much. Price moves slow.
- High Gamma (ATM near Expiry): Delta flips from 0.5 to 1.0 instantly. Price doubles/triples.
The Risk for Sellers
For option sellers, Gamma is the enemy.
If you sold a ₹10 option (hoping it goes to 0) and a sudden Gamma spike takes it to ₹50, you lose 5x your potential
profit instantly.
Trader Rule: - Buyers: Love Gamma (fast profits). - Sellers: Fear Gamma (sudden losses). This is why sellers close positions before the last hour of expiry day to avoid "Gamma Risk".
*Disclaimer: NSE/BSE frequently revise Lot Sizes and Expiry Days (e.g., SEBI Circulars 2024/2025). Always check the latest circular on nseindia.com before trading.
Standard Disclosure: Investment in securities market are subject to market risks. Read all the related documents carefully before investing. The content provided here is for educational purposes only and does not constitute financial or investment advice. AlgoStraddle Academy is not a SEBI registered investment advisor. Trading options involves high risk and capital can be lost.