Dynamic Management of Delta

Delta is the amount by which the price of an option changes for a $1 change in the
price of the underlying stock. In that sense, it measures the speed of option price
change. Absolute Delta of At the Money (ATM) option is 0.5 and as you go deeper
In the Money (ITM), it trends towards 1 and as you go deeper Out of the Money
(OTM) it trends towards 0.
Delta hedging means neutralizing the effect of Deltaon the total position, by
taking another position to offset the effect of Delta of the original position. For
example, if you are Long 10 Calls of XYZ with Delta of 0.5, then you have a delta of
+500. (10 x 100 x 0.5) and you will need to short 500 shares of IBM to gain a delta
of -500 to neutralize the positive delta. Delta of a straight long stock position is
1.

Mostly market makers use this strategy to neutralize deltas during the day so
that a sudden move in the stock does not get them into trouble.

Gamma is the 2nd order derivative, that indicates the amount by which the Delta will change
for a $1 change in the price of the underlying stock. In that sense, if Delta is velocity, then
Gamma is acceleration. :-)
Gamma is always positive for long options, so in the above example, you own 10 Calls of XYZ
with Delta of 0.5 and let's say the Gamma is 0.1. This means for every $1 change the Delta will
increase by 0.1 and the option price will increase by the Delta.
To Delta neutralize this position, we need to get -ve 500 Delta by shorting 500 XYZ shares. This
Delta hedge is only good as long as the stock price does not move at all. If it does move, the
Delta will change and we need to re-adjust our hedge. This can be looked as a a Gamma hedge.
So we don't necessarily need to Gamma hedge this unless the underlying changes. Then we
need to neutralize the Delta.Gamma hedging basically means re-adjustment of a Delta hedge.
There is a concept of Gamma scalping that is closely related to re-adjustment of a Delta hedge
with Long Gamma, but that is for another discussion.