Module 10Greeks & TreesLesson 5 of 718 min
Gamma & Theta Intuition
Formulas and qualitative behavior.
Gamma
Γ = n(d1)/(S σ √T) — convexity; peaks ATM.
Theta
Time decay; sign depends on option type/rates.
Exercise
Compute gamma; show it is larger ATM than deep OTM.
Challenge
Show gamma increases as T shrinks for ATM (careful as T→0).
Tips
- ATM gamma largest
- Gamma-scalping intuition
- Theta pays for gamma
Try it live
Gamma & Theta IntuitionRust 2021
Loading editor…
Output
Press Run to compile and execute.