Derivatives · Core
Gamma
Gamma is the sensitivity of delta to the underlying — how fast the hedge ratio moves, and who is chasing whom.
Definition
Γ = ∂²V/∂S². Long gamma means you buy dips and sell rips if you delta-hedge; short gamma does the opposite. Gamma is largest near ATM and near expiry. It is the convexity you paid for (or sold).
Why it matters
Intraday index tape often is dealer gamma. Pinning and air-pockets are gamma maps.
Case
A large short-gamma options expiry. Spot wanders, hedges amplify, and the close pins a strike. The fundamental news was thin; gamma was not.
How to read it
Net dealer gamma by strike and tenor. Your ‘view’ may be swimming in someone else’s hedge.
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