GAMMA DEEP DIVE
Plain English
Gamma measures how quickly your Delta changes. Near expiration, ATM options have explosive Gamma — small stock moves cause huge swings in the option's value. This is why the last week before expiration can be wild.
Going deeper
Gamma is the rate of change of Delta for each $1 move in the underlying. It's highest for ATM options near expiration. High Gamma means Delta changes rapidly — if you're long, this is great when the stock moves in your favor (Delta accelerates) but bad when it moves against you. If you're short Gamma (sold options), big stock moves hurt disproportionately because your directional exposure grows as the position moves against you. Professional market makers actively manage Gamma exposure.
Examples
Gamma Near Expiration
An ATM call with 1 day left has a Gamma of 0.20. If the stock moves $1, Delta changes by 0.20 — from 0.50 to 0.70. This rapid Delta shift means the option's value is extremely sensitive to small stock moves.
Gamma Risk for Sellers
You sold a $100 straddle expiring tomorrow. The stock is at $100.50. Your net delta is small. But if the stock suddenly moves to $103, your Gamma kicks in and your delta balloons, creating a large directional loss very quickly.