<p><strong>Gamma</strong> is the rate of change of an option's <a href="/NewSite/encyclopedia/delta/" class="ency-link">delta</a> with respect to a change in the price of the underlying asset. It measures the sensitivity of an option's delta to changes in the underlying's price.</p>
<p>Gamma matters because it helps traders understand how quickly an option's delta will change as the underlying asset's price moves. For example, a high gamma position can lead to significant changes in delta, which can amplify gains or losses in the option's value, making it a crucial factor in managing risk and profit in options trading.</p>