A gamma-neutral portfolio is an option position whose delta does not change even if the underlying security goes up or down significantly.
Gamma neutrality is achieved by adding additional option contracts to the portfolio, usually in contrast to the current position, in a process known as gamma hedging.
Delta gamma hedging is often used to lock in profits by creating a gamma neutral position that is also delta neutral.
A horizontal spread is a simultaneous long and short position in derivatives for the same underlying asset and strike price, but with different expiration dates.
Boundary conditions were used to establish the minimum and maximum possible values of call and put options prior to the introduction of binomial tree and Black-Scholes pricing models.
Deep-in-the-money options have strike prices that are significantly above or below the market price of the underlying asset and thus contain mostly intrinsic value.
Delta hedging is an options strategy that aims to be directional neutral by establishing compensating long and short positions in the same underlying asset.
The extrinsic value is the difference between the market price of an option, also known as its premium, and its intrinsic price, which is the difference between the strike price of the option and the price of the underlying asset.