Gamma Hedging

Just like implied volatility smile(surface!) is similar to yield curve, gamma hedging is also very similar to bond immunization. Derivative value is locally linear, which can be hedged by delta hedging. To improve the hedge, one can take the second-order correction into account, which is exactly what gamma hedging is. While delta hedging uses the underlying security, gamma hedging must use derivatives. This can be a problem: you wrote an option, you want to hedge the risk; but you need more options to do that!