Gamma flip
The level where dealer gamma changes sign. Above it the market tends to calm; below it, to accelerate.
In the chapter
Who is on the other side and what forces their hand
From the same chapter
- Market makerWhoever quotes both sides and keeps the spread. They do not bet on direction: they hedge what they are forced to take on.
- Dealer hedgingThe buying and selling of the underlying a market maker does to stay neutral. It is forced flow, and that is what makes it predictable.
- Dealer gammaThe net sign of the gamma market makers are holding. When positive their hedging brakes price; when negative it pushes it.
- Gamma wallThe strike with the most accumulated gamma. It acts as magnet and as brake, because that is where hedging piles up.