Options and Greeks

What does the gamma of an option measure?

• The rate of change of delta

• The rate of change of premium

• The rate of change of theta

• The rate of change of vega

What is the gamma value for both call and put options?

• Always positive

• Always negative

• Can be positive or negative

• Zero

Why should you avoid shorting options with a large gamma?

• They carry a high risk

• They have low liquidity

• They have low volatility

• They have high transaction costs

What happens to the delta of an ATM option when the underlying price changes?

• Delta increases

• Delta decreases

• Delta remains the same

• Delta becomes zero

What is the moneyness of an option when it transitions from slightly OTM to ATM?

• OTM

• ATM

• ITM

• Cannot be determined

What is the gamma value for ITM options?

• High

• Low

• Zero

• Cannot be determined

What is the gamma value for OTM options?

• High

• Low

• Zero

• Cannot be determined

What is the gamma value for ATM options?

• High

• Low

• Zero

• Cannot be determined

What is the relationship between gamma and delta?

• Gamma is the derivative of delta

• Gamma is the integral of delta

• Gamma is the square root of delta

• Gamma is the reciprocal of delta

What is the risk of shorting options with a high gamma?

• Directional risk

• Volatility risk

• Interest rate risk

• Liquidity risk