Definition

The rate of change in an option's delta relative to the underlying asset's price movement. It's the derivative of a derivative, because one Greek letter measuring risk wasn't nearly confusing enough for options traders.

Example Usage

The portfolio's high gamma exposure meant that small market moves could cause dramatic swings in our hedge positions.

Origin

Named after the third letter of the Greek alphabet, adopted in options pricing models in the 1970s following Black-Scholes

Fun Fact

Options traders refer to being 'long gamma' or 'short gamma' as casually as ordering coffee, while the rest of the world has no idea what they're talking about.

Source: Options pricing theory

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