Which term measures the rate of change of Delta, representing the second derivative of price?

Gamma is the term that measures the rate of change of Delta, which is itself the first derivative of price concerning an option's underlying asset. In options trading, Delta represents the sensitivity of an option's price to changes in the price of the underlying asset. Gamma, therefore, acts as the second derivative, indicating how much Delta will change as the underlying asset price moves. This makes Gamma a critical measure for traders, as it helps them understand the stability of Delta and predict how the value of an option may respond to volatility in the underlying asset's price.

By understanding Gamma, traders can manage the risk associated with options more effectively, particularly in dynamic market conditions. This sensitivity analysis is vital for developing hedging strategies and optimizing portfolios involving derivatives.