Delgamma

Delgamma refers to the rate of change of delta with respect to a change in gamma. In mathematical terms, it's the second-order derivative of an option's price with respect to the underlying asset's price, and then differentiated again with respect to gamma.

While both delta and gamma are important sensitivities in options trading, delgamma provides further insight into the stability of gamma. A large delgamma indicates that gamma is highly sensitive to changes in the underlying asset's price. This means that the option's delta will change significantly as the underlying asset's price moves, potentially leading to rapid and unpredictable changes in the option's price. Conversely, a small delgamma indicates a more stable gamma, where changes in the underlying asset's price have a lesser impact on the option's delta.

Understanding delgamma is particularly useful for traders managing large option positions or employing strategies that are highly sensitive to changes in delta. It allows them to anticipate and potentially mitigate the risks associated with rapid shifts in gamma exposure.

Delgamma is sometimes referred to by other names, though those are less common and may refer to slightly different but related concepts. It is primarily used by sophisticated options traders and risk managers due to its complexity and the higher-level mathematical understanding it requires. It's less commonly used by retail traders.