Let's now take a look at a second order.

Greek gamma, the delta of an option isn't fixed.

It changes as the underlying asset price changes, and that has an important implication for traders.

Since Delta gives us the hedge ratio.

A changing delta means a changing hedge ratio.

In other words, hedges need to be adjusted if you want to stay neutral as the underlying moves.

So traders need a way to measure how stable delta is, and that's exactly what gamma Deltas gamma is a second order Greek.

Instead of measuring how the option premium itself changes, it measures how delta changes when the underlying price moves.

You can think of it as the delta of delta, the rate of change of delta or the steepness of the delta curve at a particular point.

Options with a high gamma have deltas that change very quickly, and that's critical from a hedging perspective because it means frequent rebalancing may be needed.

Now the question is, are you long gamma or short gamma? In other words, will changes in delta help you or hurt you? Unlike Delta, the answer doesn't depend on whether it's a call or a put.

It depends on whether you are long or short.

The option itself. If you are long an option, irrespective of whether it's a call or a put your long gamma, and in that case, delta changes in your favor for a long call, delta is positive and it gets larger as the underlying asset rises.

So your participation increases as the market moves your way for a long put, delta is negative, and as the underlying asset falls, delta becomes more negative.

Again, your participation improves as the market goes in your favor.

Whereas if you are short an option, the reverse is true, you are short gamma, and that means delta always shifts against you.

For instance, if you are short court, your position has negative gamma.

As the underlying asset rises, your short positions, Delta gets more negative, hurting you further.

A short put also has negative gamma.

As the underlying asset falls, your short positions delta gets more negative, again, hurting you further.

So the general rule is simple.

If you are long the option, you are long gamma.

If you are short the option, you are short gamma.

And the key takeaway is this, because delta itself changes as the underlying price moves.

Delta hedging has to be a dynamic process.

You can't just hedge once and walk away.

You need to adjust your hedges as the market evolves.