# Gamma

### Meaning of Gamma

Gamma measures the change in Delta with respect to per unit change in underlying. If Gamma value is 0.0008 that shows that my next move in Delta will be 0.0008 if underlying changes by 1. So Gamma shows what will be the next change in Delta with respect to change in underlying.

### Important Points for Gamma

- Gamma of Option is always positive.
- Gamma of Call and Put Option is same.
- Gamma is highest at ATM and decreases as Underlying moves away.
- Gamma of Future is 0.

When you buy Call Option, Positive Gamma multiplies by Positive Quantity, hence gives Positive Portfolio Gamma. This signifies that buying Call Option means LongGamma Position.

When you Sell Call Option, Positive Gamma multiplies by Negative Quantity, hence gives Negative Portfolio Gamma. This signifies that Selling Call Option means ShortGamma Position.

When you buy Put Option, Positive Gamma multiplies by Positive Quantity, hence gives Positive Portfolio Gamma. This signifies that buying Put Option means LongGamma Position.

When you sell Put Option, Positive Gamma multiplies by Negative Quantity, hence gives Negative Portfolio Gamma. This signifies that Selling Put Option means ShortGamma Position.

### GAMMA Graph:

### Gamma with respect to change in SPOT PRICE:

**Observations: **As Spot Price increases

- Call premium increases and Put premium decreases.
- Call Delta increases and Put Delta decreases.
- Gamma is highest at ATM and decreases as UNDERLYING moves away.

### GAMMA with respect to change in STRIKE PRICE:

**Observations: **As Strike price Increases

- Call premium Decreases and Put Premium Increases.
- Call Delta Decreases and Put Delta Increases.
- Gamma is highest at ATM and decreases as UNDERLYING moves away.

### GAMMA with respect to change in DAYS TO EXPIRY:

**Observations: **As days to expiry decreases / time increases

- Both Call and Put Premium decrease.
- Call Delta decreases and Put Delta increases (Both move towards 0.5).
- ATM Gamma increases.

### GAMMA with respect to change in VOLATILITY:

**Observations: **As Volatility increases

- Both Call and Put Premium increases.
- Call Delta increases and Put Delta decreases.
- ATM Gamma decreases.

### GAMMA with respect to change in RATE OF INTEREST:

**Observations : **As Rate of Interest increases

- Call Premium increases and Put Premium decreases.
- Call Delta increases and Put Delta decreases.
- ATM Gamma decreases.