Gamma does not tell you direction. It tells you how price is likely to behave once it starts moving. Understanding which regime the market is in — positive or negative dealer gamma — shapes what kind of trade is appropriate for the day. Use it alongside the GEX Visualizer in your dashboard.
POSITIVE GAMMA — THE SHOCK ABSORBER
Dealers hedge against the move. When price rises, dealers tend to sell; when price falls, dealers tend to buy.
Volatility stays more contained and price action is more range-bound and mean-reverting.
Rips are often sold and dips are often bought. Breakouts and breakdowns have less follow-through.
NEGATIVE GAMMA — THE FUEL
Dealers hedge with the move. When price rises, dealers buy more; when price falls, dealers sell more.
Volatility expands and price action becomes more directional and trend-driven.
Upside can turn into a squeeze; downside can accelerate quickly. Breakouts and breakdowns typically have better follow-through.
TRADING TAKEAWAY
In positive gamma, favour range trades, fading extremes and quicker scalps. Keep expectations for a big trend day low.
In negative gamma, favour momentum setups, breakout and breakdown trades, runners and trend continuation.
IMPORTANT NOTE
Gamma describes market behaviour, not market bias. It is a volatility and follow-through model, not a directional signal.
To determine likely direction you still need key levels, positioning, news and catalysts, dealer location, and where spot sits relative to the major strikes.
The simplest way to hold it in your head: positive gamma is a shock absorber, negative gamma is fuel. Decide the regime before the open, then choose the type of trade that fits it.
Educational content only. Nothing in this article is a trade recommendation or financial advice. Trading involves substantial risk; a purchased 0DTE option can lose its entire premium.