As an investor in the stock market, it’s important to stay informed about various indicators that can impact your investment decisions. One such indicator is the gamma of a particular stock, which refers to the rate of change of the option’s delta with respect to the underlying stock price. In this blog post, we will focus on Tesla’s gamma and what it could mean for investors.

What is Gamma?

Gamma is a measure of the sensitivity of an option’s delta to changes in the underlying stock price. Delta is a critical metric that represents the rate of change of an option’s price with respect to the underlying stock price. A higher gamma indicates that the option’s delta will change more rapidly with changes in the underlying stock price.

In simple terms, gamma measures how much an option’s value will change when the underlying stock price moves. For example, if an option has a high gamma, it means that the option’s value will change more significantly when the underlying stock price fluctuates.

Tesla’s Gamma

According to Spotgamma, Tesla’s gamma is currently around 0.450, based on current SGOI GEX. This indicates that Tesla’s option prices are highly sensitive to changes in the underlying stock price. In other words, a small change in the stock price can result in a significant movement in the option’s value.

Short-term Support Near 400

Spotgamma also mentions that there is short-term support near 400 for Tesla’s gamma. This means that if the stock price were to drop to around 400, the option’s value would be less likely to fall significantly, providing a temporary support level.

Implications for Investors

Understanding an asset’s gamma is crucial for investors who trade options on that asset. A high gamma indicates that the option’s value will change more significantly with changes in the underlying stock price. Therefore, investors should be cautious when buying or selling options on Tesla, as a small change in the stock price can result in a significant movement in the option’s value.

On the other hand, if an investor is bearish on Tesla and believes that the stock price will drop, they may want to consider buying put options with a lower strike price to take advantage of the high gamma. This could result in a higher profit if the stock price does indeed drop.

Understanding an asset’s gamma is essential for investors who trade options on that asset. Tesla’s current gamma of around 0.450 indicates that its option prices are highly sensitive to changes in the underlying stock price. Investors should be cautious when buying or selling options on Tesla, as a small change in the stock price can result in a significant movement in the option’s value. By understanding gamma and how it impacts option pricing, investors can make more informed trading decisions and potentially increase their profits.