Module 5   Introduction to Options Trading (Video Series)Chapter 8


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8.1 – Gamma of an Option

The Gamma of an option measures this change in delta for the given change in the underlying. In other words, the Gamma of an option helps us answer this question – “For a given change in the underlying, what will be the corresponding change in the delta of the option?”

We will learn more in this video.

We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.

Key takeaways from this chapter

  1. Financial derivatives are called Financial derivatives because of their dependence on calculus and differential equations (generally called Derivatives)
  2. Delta of an option is a variable and changes for every change in the underlying and premium
  3. Gamma captures the rate of change of delta, it helps us get an answer to a question such as “What is the expected value of delta for a given change in underlying”
  4. Delta is the 1st order derivative of premium
  5. Gamma is the 2nd order derivative of premium
  6. Gamma measures the rate of change of delta.
  7. Gamma is always a positive number for both Calls and Puts.
  8. Large Gamma can translate to large gamma risk (directional risk)


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  1. Dilip says:

    Hi Karthik,
    I can’t see the theta module video after watching the gamma video.

  2. Kiran Kondaiah says:

    Hi Karthik, These videos gave me confidence and clarity to start investing in the stock market. Thank you very much for sharing these; looking forward for all the other modules…

    Any idea by when we will have the videos for all the other modules? Just to make sure I wait for them, if it is not taking long, rather than learning else where…

    Once again, thanks – Kiran Kondaiah

    • Karthik Rangappa says:

      Hey Kiran, so we wont be making videos for other modules. Vidoes are only for the Basisc, TA, FA, Futures, and OPtions. However, we will start making videos on several market topics and post them on regular basis.

  3. Sujeet says:

    Does we get the paid permium back in profit or in rise in permium?

  4. Nikhil says:

    Hi Sir
    Why and how did you take 0.0006 as Gamma? Pls explain.

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