[my xls is here trtl.bz/2XbNws1] Gamma is the rate of change of delta; aka, the second partial derivative with respect to a change in the stock price. Because call option delta is the cumulative normal distribution function (CDF), gamma has the shape of the normal probability density function (pdf)! When gamma is high, the delta-hedge is fragile. When gamma is low (i.e., when the option is deeply in- or out- of the money), delta is not very responsive to stock price changes and the delta-hedge is more robust.
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6 окт 2024
