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 tighter ranges and moves that stall rather than extend. When heavy positive size sits right at price the effect is strongest: across 48,451 board-days, the next session's range shrank step by step as the size at price grew — a pin compresses the range from both sides. That is a range, not a floor; it says nothing about which way price leaves.
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 and moves that keep going. We measured this directly on 906 sessions — negative gamma ran about a quarter more movement over the following ten days than positive gamma (median 12.8 vs 10.3 realised volatility), and the effect held in both halves. How far above zero a positive book sits added nothing once the sign was known.
One stronger version is worth knowing separately: when all three index books — SPY, QQQ and IWM — are negative at once, a wider day is much more likely. That tells you how far, never which way.
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 whether fast changes in a node mean volatility is coming — and none of them beat a random moment once the market's own move was removed. The direction reads that did survive are narrow and about change: an Apex being built near price, an Apex being unwound, an Apex stepping ahead of price.
Check the sign before the session. Positive gamma absorbs and argues for smaller expectations; negative gamma amplifies and argues for giving moves room — and neither tells you direction.
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