Crypto glossary

Gamma

Gamma measures how much an option's delta changes when the underlying price moves by one unit. High gamma means the option's sensitivity to price shifts quickly, so its value can change much faster than delta alone suggests.

Auf Deutsch lesen

Delta of the delta

Delta tells you how much an option's price moves per 1 dollar move in the underlying. But delta itself does not stay fixed. Gamma is the rate of that change. If a call has a delta of 0.50 and a gamma of 0.02, a 1 dollar rise in the underlying pushes delta to about 0.52; a 1 dollar fall pulls it to about 0.48.

Bought options, whether calls or puts, have positive gamma. Sold options have negative gamma.

Where gamma is highest

Gamma is greatest for at-the-money options and rises sharply as expiry approaches. Near expiry, an at-the-money option can flip from almost worthless to clearly valuable with a small price move, which is exactly what high gamma describes. Deep in- or out-of-the-money options have low gamma because their delta is already near 1 or 0.

An example

Say you own a BTC call one day before expiry with the strike right at the current price. Delta is about 0.5 and gamma is high. If BTC jumps 3 percent, delta may shoot towards 0.9 and the option's value rises much more than the starting delta of 0.5 implied. If BTC drops 3 percent instead, delta collapses towards 0.1 and the option heads towards worthless. The figures are illustrative.

Why traders watch it

Positive gamma works in the holder's favor: gains accelerate as the price moves your way and losses slow down as it moves against you. The cost is time decay, because high-gamma options usually also have high theta. Negative gamma is the mirror image. Option sellers who are short gamma must chase the market to stay hedged, buying as prices rise and selling as they fall, which can amplify moves.

Some analysts estimate how much gamma dealers hold around large expiries, but such estimates rely on assumptions about who is long and short and are not reliable signals on their own.

Ask Coach about it

Coach is the AI on AtenaCrypto. It explains crypto with live market data, in plain words.

How do dealer gamma positions around large options expiries affect crypto price moves?Ask Coach →

Frequently asked questions

Is high gamma good or bad?

For option buyers it adds convexity, faster gains in favorable moves, but usually comes with faster time decay. For sellers, high negative gamma is a major risk.

Why is gamma highest near expiry?

Because with little time left, a small price move decides whether an at-the-money option ends with value or worthless, so delta swings sharply.

What does short gamma mean?

Holding sold options, so your delta moves against you as the price moves. Hedging it forces you to buy high and sell low.

Learn it step by step

AC Learning explains these ideas in interactive lessons — the first eight sections are free.

Open AC Learning → Create a free account

All glossary terms · Educational reference only — not investment, legal, tax or financial advice.