what is gamma used for 
since an option s delta measure is only valid for a short period of time gamma gives traders a more precise picture of how the option s delta will change over time as the underlying price changes delta is how much the option price changes with respect to a change in the underlying asset s price gamma decreases approaching zero as an option gets deeper in the money and delta approaches one gamma also approaches zero the deeper an option gets out of the money gamma is at its highest when the price is at the money the calculation of gamma is complex and requires financial software or spreadsheets to find a precise value however the following demonstrates an approximate calculation of gamma consider a call option on an underlying stock that currently has a delta of 0 40 if the stock value increases by 1 00 the option will increase in value by 40 cents and its delta will also change after the 1 increase assume the option s delta is now 0 53 the 0 13 difference in deltas can be considered an approximate value of gamma all options that are a long position have a positive gamma while all short options have a negative gamma example of gammasuppose a stock is trading at 10 and its option has a delta of 0 5 and a gamma of 0 10 then for every 1 move in the stock s price the delta will be adjusted by a corresponding 0 10 this means that a 1 00 increase will mean that the option s delta will increase to 0 60 likewise a 1 00 decrease will result in a corresponding decline in delta to 0 40 