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发表于 2011-7-11 15:21 | 只看该作者

Gamma increases with moving closer to maturity and to ATM point all else equal. In the market you call short-term options gamma-options, and longer running ones vega-options. This is because for the former gamma and for the latter vega is the main price driver.

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krause2

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发表于 2011-7-11 15:21 | 只看该作者

How gamma changes over time

change

Can you explain how gamma changes as in-the-money, at-the-money, and out-of-the-money options move toward expiration?

It looks the curriculum is talking the delta change and no coverage for puts.

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发表于 2011-7-11 15:21 | 只看该作者

Gamma is highest (1) when options are ATM and close to expiration, so in that case delta hedging becomes hard and costly. Level 2 curriculum covers gamma extensively. I don't understand your other question.

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canadiananalyst

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发表于 2011-7-11 15:21 | 只看该作者

@mik whether doing delta is costly depends if you are gamma long or short, being gamma long actually means delta hedging brings positive p&l because you buy low and sell high. But that only compensates for loosing theta...a gamma position ultimately means you play implied vol vs delivered vol. So going long gamma pays when you think market will deliver higher vol than what is implied in option-price...

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nannan66