What does rebalancing the gamma mean?
In the Book: Dynamic Hedging at the beginning says:
- Rebalancing the gamma corresponds to buying and selling the underlying security in order to replicate the payoff of the option.
Gamma shows the rate of change of delta. How exactly can i buy the underlying security (in what quantity?) so that i rebalance the gamma? Is the gamma only for me? No it is for the stock just as the price. So how can i buy or sell to rebalance the gamma of a security? How buying and selling at the same time will replicate the payoff?