A change in the gamma of an option (or generally a derivative) with the passage of time, holding everything else constant (e.g., volatility). The gamma bleed captures the change in the gamma of an option as the time passes by (over the course of the option’s life). Empirical evidence indicates that the gamma of an option varies over time. The bleed is measured by re-pricing the option one day shorter.
The gamma bleed can be calculated taking the gamma of today and subtracting the gamma of tomorrow by re-pricing the option one day shorter:
Gamma bleed = gamma (at time n) – gamma (at time n+1)
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