The gamma flip and volatility regimes

What the flip actually is

The gamma flip, sometimes called zero gamma, is the estimated price area at which the aggregate gamma position of dealers crosses from net positive to net negative. Above it, hedging tends to absorb order flow. Below it, hedging tends to amplify order flow.

It is an estimate derived from open interest and modelling assumptions, so it moves as positioning changes and it should be treated as a zone rather than a precise line.

Why regime matters more than the level

Traders often fixate on the number. The more useful observation is the regime it implies. In a suppressed regime, breakout attempts fail more often and ranges hold. In an expansive regime, the same setup can run further and stop placement that worked yesterday is too tight today.

Regime awareness changes position sizing, target selection and how much patience a setup deserves — before any entry decision is made.

• Above the flip: expect rotation, fading extremes, contained ranges.
• Below the flip: expect follow-through, faster drawdowns, wider stops.
• Near the flip: expect transition and unstable behaviour.

Common mistakes

Treating the flip as a mechanical buy or sell level is the most frequent error. It is a description of conditions. A second mistake is ignoring that positioning is re-estimated as expiries roll and open interest changes, so yesterday's flip is not today's flip.