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Gamma

Definition of Gamma

Gamma is a mathematical formula used to measure the change in the delta of an options contract price.

Delta is the change in the price of an options contract in relation to the underlying asset’s price.

In simple terms, gamma can be called as the change of the change. The formula to calculate gamma of an options contract is: Γ = ∂2V/∂S2

Related Terms

Bond Market

A bond market is a place where bonds are issued, bought, and sold. Bonds are issued in exchange for a loan generally by governments and corporations.

After Hours Trading

After hours trading means buying and selling securities after the end of regular market hours. In India, the stock market is open for regular trade from 9.15 AM to 3.30 PM.

After hours trading is allowed from 3.40 PM to 4 PM. Around the world, stocks are known to suffer from a lack of liquidity during after hours trading.

Equity Delivery

In equity delivery, shares are delivered to an investor’s Demat account after the settlement period. That’s why it is called equity delivery. However, equity delivery is also known as delivery trading and long term investing.

For example, let’s say you place an order for 10 HDFC shares on Tuesday with a view of holding onto them for the long term. The trade will be settled on Thursday shortly after which the shares will be delivered to your Demat account.

Commodity Exchange

A commodity exchange is a marketplace where commodities and related derivative contracts are standardized and traded. The commodity exchange can be split into these sub-markets:

  • Derivatives market: this is where commodity exchanges allow futures, options, forwards, and other derivatives to be traded
  • Spot market: this is where commodity exchanges allow buying and selling of commodities in real-time (on the spot), including cash contracts

In India, there are 4 commodity exchanges that are popular and widely turned to:

  • Indian Commodity Exchange (ICEX)
  • Multi Commodity Exchange of India (MCX)
  • National Commodity & Derivatives Exchange Limited (NCDEX)
  • National Multi Commodity Exchange of India (NMCX)

Within these exchanges, the most commonly traded commodities include:

  • Crude oil
  • Coffee
  • Corn
  • Cotton
  • Gold
  • Natural gas
  • Silver
  • Sugar
  • Wheat

Average True Range Atr

The Average True Range (ATR) is a technical indicator used to measure market volatility, typically using the average of true ranges from 14 periods that can be daily, weekly, monthly, or even intraday values.

The formula for ATR is:

ATR = Previous ATR (n - 1) + True Rangen / n

n= number of periods
True Range = The greater/highest of these:

  • High - low (Day 1)
  • Absolute value of (Day 1’s high - Day 0’s close)
  • Absolute value of (Day 1’s low - Day 0’s close)

Enterprise Value

Enterprive Value is a metric used to determine the total value of a company. It is valuation technique used by companies to understand how much money they need to pay to acquire another company.

Conversely, Enterprise Value is also used to figure out the amount of money a company can get on selling their business. To calculate the EV of a company, the total market capitalization is combined with the net debt or cash subtracted from debt. The formula to calculate Enterprise Value is:

EV = Market Capitalization + Net Debt

Or

EV = Market Capitalization + Debt - Cash



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