Crypto options glossary
What is gamma in options?
Gamma is how fast delta changes when the underlying moves. High gamma means an option's delta, and so its profit or loss, swings quickly with Bitcoin. Gamma is highest for at-the-money options close to expiry. Option buyers are long gamma and gain from big moves; sellers are short gamma and lose from them.
- Gamma is the change in delta for a one-dollar move.
- It is highest at the money, and grows into expiry.
- Buyers are long gamma; sellers are short gamma.
- On Bitcoin, gamma × 1,000 is the delta change for a 1,000 move.
| Strike | Call delta | Delta change per 1,000 |
|---|---|---|
| 83,000 | 0.59 | +0.086 |
| 83,500 | 0.55 | +0.088 |
| 84,000 | 0.50 | +0.090 |
| 84,500 | 0.46 | +0.090 |
| 85,000 | 0.41 | +0.089 |
The 84,000 call's delta is 0.50 now. After a 1,000 rise in Bitcoin it is about 0.59, so every further dollar is worth more to a buyer, and costs a seller more.
Gamma × 1,000, from Delta Exchange. It is largest at the money and grows as expiry comes closer.
Questions people ask
Why is gamma risky for option sellers?
Because a sold option's delta grows against you as Bitcoin moves toward the strike, so losses speed up. Near expiry, at-the-money gamma is so high that a small move can turn a winning position into a losing one.
What is gamma risk on expiry day?
On the last day, an at-the-money option's gamma is at its highest and its value can swing sharply within minutes. That is why many traders close or hedge sold at-the-money options before the final hours.
Is high gamma good or bad?
It depends on your side. For a buyer, high gamma makes a winning move pay faster. For a seller, it makes a losing move hurt faster. The seller is paid for that risk through theta.
What do long gamma and short gamma mean?
Long gamma means you own options: your delta grows in your favour as the price moves, so big moves help you. Short gamma means you have sold options: your delta grows against you, so big moves hurt. Long gamma pays theta; short gamma earns it.
Is gamma the same for calls and puts?
Yes. A call and a put with the same strike and expiry have the same gamma. Only the sign of your position, bought or sold, decides whether gamma works for or against you.
Why does gamma rise near expiry?
Because the outcome is about to be decided. With hours left, an at-the-money option will end either worth something or worth nothing, so its delta must swing between 0 and 1 on small moves. That swing is gamma.
Gamma, worked in numbers
An example with round numbers. Bitcoin is at 80,000. An at-the-money call has a delta of 0.50 and a gamma of 0.0001 per dollar, so its delta changes by 0.10 for every 1,000 Bitcoin moves.
Bitcoin rises 1,000: the delta goes from 0.50 to about 0.60. Over that first 1,000 the call gained about 550 per Bitcoin, the average of the two deltas. If Bitcoin rises another 1,000, the delta climbs to about 0.70 and the call gains about 650 more. Each step pays the buyer more than the last.
For the seller it is the same sum with the sign reversed: each further 1,000 costs more than the one before. That is gamma risk, and it is why a sold option's loss speeds up as the price moves through the strike.
Where gamma is high and where it is low
Gamma depends on how close the option is to the money and how close it is to expiry.
| Option | Gamma | Why |
|---|---|---|
| At the money, hours to expiry | Highest | A small move decides everything |
| At the money, a week out | Moderate | Still time for the price to come back |
| Out of the money, a week out | Low | A small move changes little |
| Deep in the money | Low | Already behaves like the coin |
How traders use gamma
Buyers look for it; sellers manage it.
- Buyers who expect a sharp move buy at-the-money options with little time left: the most gamma for the premium, paid for in time decay.
- Sellers cut size, tighten stops or buy wings on expiry day, when gamma on their sold strikes is at its highest.
- Traders holding a delta-neutral position watch gamma to know how quickly it will stop being neutral.
- An adjustment rule that reacts when the price nears a sold strike is a gamma rule in plain words.
Gamma and theta are two sides of one trade
An option buyer pays theta every day in exchange for gamma: the chance to gain quickly from a big move. A seller earns theta and carries gamma. Neither is free; the market prices them against each other.
Where gamma gathers
At the money, gamma keeps rising all the way to expiry. A strike a few percent away behaves differently: its gamma peaks a couple of days before expiry, then fades to nothing as that strike becomes unlikely to be reached.
Why gamma matters more with daily expiries
Bitcoin options expire every day on Delta Exchange India, so there is always a contract in its final hours, where gamma is highest. Selling at-the-money options into that window collects the fastest decay and carries the sharpest gamma risk.
Common mistakes with gamma
Most of them are made by sellers, on expiry day.
- Selling at-the-money options in the last hours for the fast decay, with no stop. The decay is fast because the gamma risk is high.
- Assuming a delta-neutral position stays neutral. Short gamma means every move makes it less neutral, in the wrong direction.
- Sizing by premium collected rather than by what a 2% move would cost.
- Forgetting that gamma cuts both ways for a buyer too: a move away from the strike shrinks delta just as fast.
Written by the Algoclear team · Updated 22 September 2026 · Examples use Bitcoin options on Delta Exchange India.
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