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The Gamma
In options trading, gamma is a measure of the rate of change of the delta. The gamma is expressed as a percentage and reflects the change in the delta in response to a one point movement of the underlying stock price.
Like the delta, the gamma is constantly changing, even with tiny movements of the underlying stock price. It generally is at its peak value when the stock price is near the strike price of the option and decreases as the option goes deeper into or out of the money. Options that are very deeply into or out of the money have gamma values close to 0.
Example
Suppose for a stock XYZ, currently trading at $47, there is a FEB 50 call option selling for $2 and let's assume it has a delta of 0.4 and a gamma of 0.1 or 10 percent. If the stock price moves up by $1 to $48, then the delta will be adjusted upwards by 10 percent from 0.4 to 0.5.
However, if the stock trades downwards by $1 to $46, then the delta will decrease by 10 percent to 0.3.