Gamma Options Greeks Lesson with SJ Options
In this excerpt from our options mentoring course, Morris gives us some insight on understanding Gamma the Options Greek.
Morris is the founder of San Jose Options.
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..over here. And then we’ll say it goes up to like the hundred over here. Since the gamma is lower, farther out in time, then your delta’s changing slower and then the option chain goes along the distance. You guys know we traded the Russell a lot. If we’re looking at the Russell, then we might go farther out in time and this might go down to, let’s say, a 2 or 300 strike and then we’ll say at the money is around 800 strike.
The call side or this direction usually won’t be as long so it’s not going to go all the way to 1,600. Shorter term, your at the moneys will be the same but then when you get down to that zero delta, it’s not going to reach all the way up to the 200th. We’d have to look at the option chain. Unfortunately, I can’t at all erase all the drawings.
Let’s just estimate, let’s say, short term right now be, it might be something like a 700, for example. This is short term so you could just see the difference there. Again, that’s caused by the change in the gamma. When your gamma is lower, your delta over here changes a lot slower. You have like a 25 here, 35, 45 and so on. Up here, it’s just going to go from a 50 delta to the zero really fast because your gamma’s so high and your gamma is dictating how fast that delta’s changing.