Options Greeks
Why does Gamma risk expand dramatically for near-term ATM options approaching expiration?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Gamma risk expands sharply for at-the-money options as expiration nears because tiny underlying price moves can swing delta between near-zero and near-one in a very short window.
How it works
This happens because time value compresses rapidly close to expiration, concentrating the option's sensitivity entirely around the strike price rather than spreading it across a wider price range.
An example
An ATM XYZ option expiring tomorrow can see its delta swing from 0.30 to 0.70 on a modest intraday price move, unlike a similar option with months remaining.
Risk & limitations
Elevated gamma near expiration also magnifies losses for option sellers, since small adverse moves can cause outsized and fast changes in position value.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.