OK, time for the Parthenon of Options terms, Gamma.Gamma is the rate of change of the delta for a $1 change in the price of the underlying asset.
Again, that's the basic meaning. But like Delta, it has broader meaning when applied to an entire position. Someone might say "I'm long 300 Deltas in AAPL with 100 Gamma".
What he means is that his share equivalent position now is long 300, but if Apple lifts $1, he will be long 400, if it lifts $2 he will be long 500, et. al. And scratch that, reverse it on the downside. Down $1, you are only long 200, yada yada.
How do you get a long gamma position? The simple answer is to buy straddles or strangles. Buy either one and you get longer on the way up and shorter on the way down.
Which sounds like a great concept by the way. Stock rallies and you are instantly riding it. But alas, there's a catch. It costs money to carry such a position in the form of daily decay. Which is known as Theta actually. And I don't want to go too deep into Theta right now as I am running out of relevant Greek terms.
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