In a few options positions I'm currently holding I noticed delta values of ~0.6 while gamma is ~1.0 which surprised me as I thought delta can never be greater than 1 - meaning for every 1\$ move in the underlying security, option price moves for 1\$ (x100) as well. According to this delta can be greater than 1. However, I'm curious how high it can go and what does delta of 1.5 mean in terms of a price change? Does it mean that option price moves 1.5\$ for every 1\$ move in the underlying security? Options Greeks screenshot
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1$\begingroup$ Gamma is the rate of change of the delta for a small change in the price of the underlying asset. Delta doesn't go to 1.5. I recommend you check how your provider quotes (defines) gamma. $\endgroup$– AKdemyOct 12, 2021 at 22:07
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$\begingroup$ This answer shows different computations for gamma in Black76. $\endgroup$– AKdemyOct 12, 2021 at 22:17
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$\begingroup$ Coincidentally, I just answered your question indirectly by answering another question here. Hope it helps. $\endgroup$– Jan StullerOct 13, 2021 at 16:12
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$\begingroup$ @JanStuller - Thanks. Can we think of gamma as a sort of "acceleration" of change in delta? As soon as delta starts changing, acceleration will slow down. $\endgroup$– FlionOct 14, 2021 at 18:56
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$\begingroup$ Delta can be greater than 1 if you have formulas in your payoff function. Easy example is a basket option. Say the weights are 2, -2, 1, -1. Then your respective maximum Deltas are 2, -2, 1, -1. I see this come up all the time with exotic payoffs. $\endgroup$– MattJul 23, 2022 at 20:36
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