Which of the following statements is valid for European options?
A) The gamma of a call is positive and that of a put is negative.
B) The gamma of a call is negative and that of a put is negative.
C) The gamma of a call is negative and that of a put is positive.
D) The gamma of a call is positive and that of a put is positive.

Question

Quizplus · Accepted Answer

Gamma measures the rate of change of delta with respect to changes in the underlying asset's price. For both call and put European options, gamma is always positive, as the delta of both types of options moves in the same direction as the price of the underlying asset.

Which of the Following Statements Is Valid for European Options