# Gamma

> The rate at which an option's delta changes for each $1 move in the underlying stock, highest for at-the-money options near expiration.

Source: https://www.quantisnow.com/glossary/gamma
Topic: Glossary / Options
Also known as: option gamma, options gamma
Last updated: 2026-10-27

Gamma is the rate at which an option's [delta](https://www.quantisnow.com/glossary/delta) changes for each $1 move in the underlying stock. If delta measures speed, gamma measures acceleration.

## How it works

Gamma is positive for anyone who owns calls or puts and negative for anyone who has sold them. It is highest for [at-the-money](https://www.quantisnow.com/glossary/at-the-money) options and rises sharply as expiration approaches, which is why [0DTE options](https://www.quantisnow.com/glossary/zero-dte) can swing from nearly worthless to deep in the money within minutes. Deep in-the-money and far out-of-the-money options have low gamma.

For small moves, the new delta is approximately the old delta plus gamma times the price change.

## Why it matters for traders

Gamma matters most through market makers. A dealer who sells calls to customers is short gamma. To stay hedged, the dealer buys stock as the price rises and sells as it falls, which pushes in the same direction as the move.

When customers buy large amounts of short-dated calls, that hedging can feed on itself: rising prices push deltas higher, dealers buy more shares, and the stock climbs further. This is often called a gamma squeeze, and it can combine with a [short squeeze](https://www.quantisnow.com/glossary/short-squeeze) in heavily shorted stocks. The reverse happens when dealers are long gamma: their hedging tends to dampen moves and can pin a stock near a large strike into expiration.

For option sellers, high gamma means a position's risk can change very quickly.

## Example

Contoso Robotics (CTSO) trades at $50. The $50 call expiring in five days has a delta of 0.50 and a gamma of 0.08.

- If CTSO rises $1 to $51, delta becomes roughly 0.58.
- If it rises another $1 to $52, delta is roughly 0.66 (gamma itself shifts slightly as the stock moves).

A dealer short 1,000 of these calls would need to hold about 50,000 shares to hedge at $50, about 58,000 at $51 and about 66,000 at $52, buying into the rally each time.

## FAQ

### What is a gamma squeeze?

A rapid rise in a stock driven partly by option dealers buying shares to hedge calls they have sold, as rising prices increase those calls' deltas.

### Why is gamma highest near expiration?

With little time left, a small move in the stock can decide whether an at-the-money option finishes worth something or nothing, so its delta swings much faster.

## Related terms

- [Delta](https://www.quantisnow.com/glossary/delta.md): How much an option's price is expected to change for a $1 move in the underlying stock, from 0 to 1 for calls and 0 to -1 for puts.
- [Theta](https://www.quantisnow.com/glossary/theta.md): The estimated amount an option loses in value each day from the passage of time, with all other factors held constant.
- [At the money (ATM)](https://www.quantisnow.com/glossary/at-the-money.md): Describes an option whose strike price equals or sits very close to the current price of the underlying stock.
- [0DTE options](https://www.quantisnow.com/glossary/zero-dte.md): Options traded on the same day they expire, most commonly on the S&P 500 index (SPX) and major index ETFs such as SPY and QQQ.
- [Short squeeze](https://www.quantisnow.com/glossary/short-squeeze.md): A rapid price rise driven by short sellers buying back shares to limit losses, which pushes the price higher and forces more covering.

## On Quantisnow

- [Options chains](https://www.quantisnow.com/options)
- [Options chains](https://www.quantisnow.com/docs/options-chains)
- [Options chain basics](https://www.quantisnow.com/guides/options-chain-basics)