Cryptocurrency Q&A
Is gamma highest at the money?
Is gamma highest at the money?
Daniele
Sun Aug 18 2024
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7 answers
1415
Excuse me, could you please elaborate on the statement "Is gamma highest at the money?" I'm curious to understand the context in which this question arises. In finance and particularly in options trading, gamma measures the sensitivity of the delta of an option to changes in the underlying asset's price. So, are you suggesting that the gamma value peaks when an option is "at the money," meaning its strike price is equal to the current market price of the underlying asset? I'd love to hear your thoughts on why this might be the case and how it impacts traders' decision-making processes.
7 answers
Lorenzo
Tue Aug 20 2024
Gamma, a crucial metric in option pricing, attains its peak value for at-the-money (ATM) calls and puts. This signifies that for options that are neither in-the-money nor out-of-the-money, gamma exerts the greatest influence on the rate of change of delta.
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KimonoElegance
Tue Aug 20 2024
As options deviate from their ATM status, specifically moving towards out-of-the-money (OTM) territory, gamma diminishes progressively. This trend underscores the diminishing sensitivity of an option's delta to price fluctuations as it becomes increasingly unlikely to exercise the option profitably.
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BlockchainWizard
Mon Aug 19 2024
Delta, another pivotal metric, represents the change in an option's value relative to a one-unit change in the underlying asset's price. For ATM options, the theoretical delta experiences more pronounced shifts in response to stock price movements compared to OTM options.
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CryptoNinja
Mon Aug 19 2024
BTCC's services encompass spot trading, providing users with a secure and efficient platform to buy and sell digital assets. Furthermore, the exchange facilitates futures trading, enabling traders to speculate on the future prices of cryptocurrencies and hedge against potential risks.
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mia_rose_lawyer
Mon Aug 19 2024
This phenomenon stems from the inherent characteristics of ATM options, which sit at the threshold between profitability and unprofitability. Slight fluctuations in the stock price can tip the balance, making ATM options highly responsive to market dynamics.
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