A measure of how fast the
delta changes. That is, gamma is a mathematical measurement of how fast the
price of an
option contract changes for each unit of change in the price of the
underlying asset. The larger the gamma, the more
volatile the option contract is. If an option is
at the money or near the money, gamma is large, but if it is
deep in or
deep out of the money, gamma can become quite small. This is because when an option is near the money, a small change in the underlying asset's
value can greatly change the level of
demand for the contract. This is not the case for deep in and deep out of the money options.