A method of managing risk in options trading by establishing an asset portfolio whose delta rate of change is zero. A gamma-neutral portfolio hedges against second-order time price sensitivity. Gamma is one of the "options Greeks" along with delta, rho, theta and vega. These are used to assess different types of risk in options portfolios. The risk level of an options portfolio could also be managed through delta neutral, theta neutral and vega neutral strategies, which are used to hedge against the risks of price sensitivity, time sensitivity and implied volatility.

A gamma neutral portfolio can be created by taking positions with offsetting deltas. This helps to reduce variations due to changing market prices and conditions. A gamma neutral portfolio is still subject to risk, however. For example, if the assumptions used to establish the portfolio turn out to be incorrect, a position that is supposed to be neutral may turn out to be risky. Furthermore, the position has to be rebalanced as prices change and time passes.

www.worldscientific.com [PDF]

… The purpose of this inversion is that we can compute the first two risk-neutral moments of the payoff function and … parameters that specify the pdf In other words, if we want to approximate a random variable by the reciprocal gamma … 208 Quantitative Analysis in Financial Markets …

academic.oup.com [PDF]

… The purpose of this inversion is that we can compute the first two risk-neutral moments of the payoff function and … parameters that specify the pdf In other words, if we want to approximate a random variable by the reciprocal gamma … 208 Quantitative Analysis in Financial Markets …

www.jstor.org [PDF]

… The purpose of this inversion is that we can compute the first two risk-neutral moments of the payoff function and … parameters that specify the pdf In other words, if we want to approximate a random variable by the reciprocal gamma … 208 Quantitative Analysis in Financial Markets …

www.tandfonline.com [PDF]

… The purpose of this inversion is that we can compute the first two risk-neutral moments of the payoff function and … parameters that specify the pdf In other words, if we want to approximate a random variable by the reciprocal gamma … 208 Quantitative Analysis in Financial Markets …

www.tandfonline.com [PDF]

… The purpose of this inversion is that we can compute the first two risk-neutral moments of the payoff function and … parameters that specify the pdf In other words, if we want to approximate a random variable by the reciprocal gamma … 208 Quantitative Analysis in Financial Markets …

link.springer.com [PDF]

… The purpose of this inversion is that we can compute the first two risk-neutral moments of the payoff function and … parameters that specify the pdf In other words, if we want to approximate a random variable by the reciprocal gamma … 208 Quantitative Analysis in Financial Markets …

www.tandfonline.com [PDF]

… The purpose of this inversion is that we can compute the first two risk-neutral moments of the payoff function and … parameters that specify the pdf In other words, if we want to approximate a random variable by the reciprocal gamma … 208 Quantitative Analysis in Financial Markets …

www.sciencedirect.com [PDF]

… The purpose of this inversion is that we can compute the first two risk-neutral moments of the payoff function and … parameters that specify the pdf In other words, if we want to approximate a random variable by the reciprocal gamma … 208 Quantitative Analysis in Financial Markets …

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You calculate gamma by taking delta and multiplying it by vega .

Gamma neutral means that an option position has no gamma risk.

A gamma-neutral portfolio helps to reduce variations due to changing market prices and conditions.

Options are contracts that give the buyer the right, but not obligation, to buy or sell a security at a predetermined price within a specified time period.

An option is ITM when it has intrinsic value; OTM when it doesn't have intrinsic value; and ATM when its strike price equals the current stock price.

Hedging your portfolio with options protects you from market volatility by providing downside protection and limited upside potential for your investments.

Anyone who wants to protect their portfolio against market fluctuations can use options.

Vega represents how much an option's premium will change given a one percent increase in implied volatility .

By taking positions with offsetting deltas.

The position has to be rebalanced as prices change and time passes.

Gamma represents how much delta will change given a one point move in the underlying asset's price.