Dealer Gamma · Foundations
Free to readDealer Gamma & the Gamma Flip, Explained
Options dealers have to hedge. Whether that hedging calms the market or amplifies it depends on one thing: which side of the gamma flip price is on.
Every option a dealer is short or long carries gamma — the rate at which its delta changes as the underlying moves. To stay hedged, a dealer must trade the underlying as price moves, and the direction of that trading flips depending on whether the dealer's book is net long or net short gamma. That single fact drives whether a market mean-reverts quietly or trends violently — and the Dealer Gamma Exposure (GEX) tool estimates it from the open-interest data everyone can see.
The two regimes
When dealers are net long gamma, hedging is stabilizing: they sell into rallies and buy into dips to stay flat, which damps volatility and tends to pin price. When dealers are net short gamma, hedging is destabilizing: they must buy as price rises and sell as it falls, feeding the move and amplifying volatility. Same dealers, opposite behavior — and the switch between them has a price level.
Bars are net dealer gamma at each strike (put-heavy strikes negative, call-heavy strikes positive). The amber line is cumulative net GEX; where it crosses zero is the gamma flip. Spot below the flip = short-gamma regime (hedging amplifies); above it = long-gamma (hedging dampens).
The flip is a level, not a forecast
The gamma flip level is the price where cumulative net dealer gamma crosses zero — the boundary between the two regimes. Above it the market has a built-in shock absorber; below it, an accelerant. Traders watch the flip two ways: as a magnet where price tends to pin when dealers are long gamma, and as a trapdoor — once price breaks below it, hedging flow can turn an ordinary pullback into an air pocket.
It's a heuristic, not a flow model
GEX is an estimate. It infers dealer positioning from open interest using a standard sign convention, and it can't see every dealer, every expiry, or true inventory. Treat it as a regime heuristic — a high-quality read on whether hedging is likely stabilizing or amplifying — not a precise model of order flow. Used that way, it's one of the most useful context tools on the desk.
These ideas are free. To pull a live gamma profile and flip level: ETFs with ETF Analytics, any optionable single stock with ETF + Equities, and the full GEX-by-strike data as a CSV with Everything.
See plans →Your next step
You now know hedging flips from shock-absorber to accelerant at one price level. Go find where it is.
Open the Dealer Gamma tool → Read: how to read the tool → Read: the two regimes →Educational content from Nations Indexes. GEX is an estimate of dealer positioning from open interest under a standard sign convention; it is a regime heuristic, not a precise flow model, and nothing here is investment advice.