Gamma of straddles

Quantitative Finance Level 1

True, False or It depends?

We know that the ATM straddle price can be approximated by the formula

\[ Y_{ATM} = \frac{ 1}{ 2000} S \sigma \sqrt{t}. \]

Since gamma is the second (partial) derivative with respect to the underlying price \(S \), the gamma of the straddle is 0.

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Gamma of straddles

Excel in math and science

Master concepts by solving fun, challenging problems.

It's hard to learn from lectures and videos

Learn more effectively through short, interactive explorations.

Used and loved by over 5 million people

Learn from a vibrant community of students and enthusiasts, including olympiad champions, researchers, and professionals.

Learn from a vibrant community of students and enthusiasts,
including olympiad champions, researchers, and professionals.

Learn from a vibrant community of students and enthusiasts,
including olympiad champions, researchers, and professionals.