Positive vs negative gamma: the two kinds of trading day
Most traders classify sessions after the fact — that was a chop day, that was a trend day. Dealer gamma lets you make a reasonable guess beforehand, because the hedging that shapes the day is already sitting on the board when the bell rings.
Positive gamma: the market absorbs
When dealers are net long gamma they must trade against price to stay hedged — selling strength, buying weakness. That is a stabilising force applied continuously by the largest participants in the market.
The practical signature is tight ranges, moves that stall rather than extend, and price gravitating toward the heaviest strikes. Breakouts fail more often than they run.
Negative gamma: the market amplifies
When dealers are net short gamma the hedging flips direction — they must buy as price rises and sell as it falls. Now the largest participants are pushing in the same direction as the move.
The signature is expansion: wider ranges, moves that keep going, and sharp air pockets where liquidity thins out. We measured this directly — the most negative-gamma days run roughly 3.5% to 7% wider than a symbol's normal range, and the effect held in both halves of the history we tested.
What it does not do
Gamma regime is a claim about magnitude, not direction. Negative gamma tells you a move will stretch; it does not tell you which way.
That distinction has teeth. We tested several ways of extracting direction from dealer positioning — including whether swings in positioning precede intraday turns — and none of them beat a random moment once the market's own move was removed. Magnitude is measurable. Direction, from this data, is not.
Check the sign before the session. Positive gamma argues for fading extremes; negative gamma argues for giving moves room — and neither tells you direction.
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