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.
by
Calvin Lin