Concavity, Convexity, and Gamma

Negative Gamma is always associated with a concave profile. Positive Gamma is always associated with a convex profile.

The following are some ways to help you remember these terms.

  • Negative is, well, a negative word. Negative words make people sad. The profile of a Negative Gamma trade has a sad face.
  • Positive is a happy word. Positive Gamma trades make a smiley face.
  • Concave means the profile is like the roof of a cave — it curves overhead.
  • Convex is the opposite of Concave.

Watch this video to see some examples of convex and concave options profiles and the related Gamma measurement.