Gamma Flip

A gamma flip occurs when the aggregate gamma of market makers shifts from positive to negative, or vice versa, at a specific price level. This shift significantly alters the expected hedging behavior of market makers, which can lead to a change in market volatility regimes.

When gamma flips from positive to negative, the market often becomes more prone to volatility and sharp price moves because market makers are forced to trade in the direction of the trend. Traders monitor these levels closely, as they often represent critical support or resistance zones where the market's mechanical bias shifts.

Identifying a gamma flip requires real-time data on options open interest and strike price distribution across the market.