15 lines
976 B
Plaintext
15 lines
976 B
Plaintext
At seven days until expiration, there is less time for price action in the
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stock to change the expected moneyness at expiration of ITMs or OTMs.
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ATM options, however, continue to be in play. Here, the ATM gamma is
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approaching 0.35. But the strikes below 41 and above 48 have 0 gamma.
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Similarly-priced securities that tend to experience bigger price swings
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may have strikes $3 away-from-the-money with seven-day gammas greater
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than zero. The volatility of the underlying will affect gamma, too. Exhibit
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2.9 shows the same 19 percent volatility QQQ calls in contrast with a graph
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of the gamma if the volatility is doubled.
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EXHIBIT 2.9 Gamma as volatility changes.
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Raising the volatility assumption flattens the curve, causing ITM and
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OTM to have higher gamma while lowering the gamma for ATMs.
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Short-term ATM options with low volatility have the highest gamma.
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Lower gamma is found in ATMs when volatility is higher and it is lower for
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ITMs and OTMs and in longer-dated options. |