What is Gamma in Options?

Gamma measures how fast an option's delta changes as the stock moves. High gamma means the option's sensitivity is accelerating, so gains and losses snowball. It is largest with the stock right at the strike and expiration close.

If delta is how hard your option tracks the stock, gamma is how fast that tracking itself changes. It exists because delta reflects the option's odds of paying off, and every dollar the stock moves changes those odds. A $50 call with the stock at $42 barely reacts; at $48, every next dollar is make-or-break, so delta races upward; at $60 the outcome is settled and delta parks near 1. Gamma is the speed of that repricing, and it peaks when the stock sits right at the strike with almost no time left, because that is when a single dollar decides everything, which is why expiration week turns small stock moves into violent option swings. It even moves the wider market: a dealer who sold you a call loses more the higher the stock goes, so they buy shares to offset the risk, and the higher it climbs the more they must buy, feeding the very rally being bet on, the gamma squeeze behind the 2021 meme stock runs.

Sliding a paperclip toward a magnet. A foot away, nothing; at six inches, a faint tug; in the last inch the pull strengthens so fast the clip leaps out of your fingers. The pull itself is delta, how hard the clip is being drawn right now; gamma is how quickly that pull is ramping up as the distance closes, gentle far away, explosive near contact.