[FIG Artistic Gymnastics Championships - Day 10 Jin Zhang of China during Balance Beam for Women at the Aspire Dome in Doha, Qatar, Artistic FIG Gymnastics World Championships on 3 of November 2018. (Photo by Ulrik Pedersen/NurPhoto via Getty Images)]Getty Images / NurPhoto / Contributor * BLUNTLY, GAMMA IS THE FIRST DERIVATIVE OF THE OPTION DELTA AND DESCRIBES THE SENSITIVITY OF THE DELTA IN RELATION TO PRICE MOVEMENTS OF THE UNDERLYING SECURITY. * A FLIP IS THE TRANSITION FROM A PRIOR (IN THIS CASE POSITIVE) STATE, TO ITS OPPOSITE (NOW NEGATIVE) STATE. * BASICALLY, IT'S THE POINT IN THE MARKET WHERE YOU WANT TO STEP BACK AND WAIT UNTIL THE FORCES OF GOOD AND EVIL HAVE BATTLED IT OUT AND MORE SANE EXPLANATIONS COME INTO PLAY. * THORSTEN ROLAND WEGENER SPENT 20 YEARS TRADING EQUITY DERIVATIVES AND WAS A PARTNER AT BEAR STEARNS. READ HIS ORIGINAL COLUMN ON MACRO HIVE HERE. * VISIT BUSINESS INSIDER FOR MORE STORIES. ------------------------- There is a new buzzword in town: 'Gamma Flip'. It is used to explain (due to a lack of any _sane_ explanation for current market behaviour) why the S&P seems stuck at practically all-time highs and what might happen if things turn bad. In fact, it is so hot that even TV pundits are elaborating on its potential advantages and dangers. But what exactly is it? LEARNING GREEK Gamma as a _thing_ has been around since traders began to use options to hedge, speculate, and mitigate risk. But it was not until the shiny Black-Scholes model emerged in the '70s that anyone knew what to call it. Bluntly, gamma is the first derivative of the option delta and describes the sensitivity of the delta in relation to price movements of the underlying security. A flip is the transition from a prior (in this case positive) state, to its opposite (now negative) state. For many that's hardly an eloquent answer, nor even a particularly explanatory one. Of course, there is a far easier way of describing gamma (and the potential flip it implies), but to reveal it would rob derivatives experts of their inordinately rotund paycheques… Luckily for you, nobody is paying me to be pretentious anymore.SEE THE REST OF THE STORY AT BUSINESS INSIDERNOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption SEE ALSO: * All the 'Star Wars' movies, ranked from worst to best — including 'Rise of Skywalker' * The one word you should strike from your vocabulary stat to sound more confident * GOLDMAN SACHS: These 20 unloved stocks are spring-loaded for surprisingly big gains in 2020
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