Question

What is meant by the gamma of an option position? What are the risks in the situation where the gamma of a position is highly negative and the delta is zero?

   What is meant by the gamma of an option position? What are the risks in the situation where the gamma of a position is highly negative and the delta is zero?

Options, Futures, and Other Derivatives

Options, Futures, and Other Derivatives

John C. Hull 10th Edition

Chapter 19, Problem 5

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In other words, it measures how sensitive the delta of an option is to changes in the price of the underlying asset. When the gamma of a position is highly negative and the delta is zero, it means that the option's delta is changing rapidly in response to small Show more…

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What is meant by the gamma of an option position? What are the risks in the situation where the gamma of a position is highly negative and the delta is zero?

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