April 16th, 2018, 11:10 pm
I don't really see 1 as being a magic number when it comes to gamma. For delta, yeah - traditional put and call deltas generally stay in the (-1,1) range, at least if suitably defined. For standard options, gamma goes to infinity as time to maturity goes to zero and you are at the money. No way to model that away, nor a way to hedge it (aside from outright taking the opposite side of the option trade). The good news is that it doesn't happen too often, although if you search for "pinning risk options" it appears to be more common than Black-Scholes would suggest.