Gamma measures how fast delta changes. For at-the-money options it rises sharply as expiry approaches, and on expiry day it can be extreme.
What that looks like
With hours left, an ATM option might have delta 0.50. A small move up can push it to 0.90, and a small move down to 0.10. The premium can double or halve in minutes.
For buyers
High gamma is what makes cheap expiry-day options tempting. The odds are still against you, because time value is disappearing just as fast. Size these trades as if the premium will go to zero.
For sellers
- Short ATM options on expiry day carry the most gamma risk of any position.
- A sudden move can turn a small credit into a large loss before you can react.
- Use spreads instead of naked short options, and close positions early rather than holding to the final minutes.
This article is for education only and is not financial advice. Options involve risk and are not suitable for every investor.