Gamma Acceleration

Gamma acceleration refers to the rapid increase in an option's gamma as it approaches expiration while being at-the-money. This phenomenon creates significant risk for market makers, as their delta hedge becomes increasingly unstable.

In crypto, where price movements can be violent, gamma acceleration can lead to massive forced buying or selling as market makers scramble to rebalance. This can create feedback loops that exacerbate market moves, sometimes referred to as a gamma squeeze.

Understanding this risk is vital for any trader managing large derivative books. It highlights the importance of managing gamma exposure, especially during periods of high market sensitivity.