2026 CFORCE  Options Class Marker Practice Test

Gamma is defined as the measure of the sensitivity of Delta to changes in the price of the underlying asset. Delta itself indicates how much an option's price is expected to change for a $1 change in the underlying asset's price. However, Delta can change as the underlying asset's price fluctuates, and Gamma quantifies this relationship.

In practical terms, Gamma helps traders understand how stable their Delta is as market conditions change. A high Gamma value indicates that Delta is likely to change quickly as the underlying price moves, while a low Gamma suggests that Delta will remain more stable. This sensitivity can be particularly important for options traders managing their portfolios and hedging their positions.

The other concepts mentioned, such as market sentiment, time decay, and implied volatility, relate to different aspects of options trading but do not describe what Gamma specifically measures. Understanding Gamma is crucial for options trading as it allows traders to predict how their positions might react to price changes in the underlying asset effectively.