Gamma flip

The gamma flip is the price where market makers' hedging changes character. Above it, hedging tends to calm moves; below it, hedging tends to make them bigger. On the chart it is the dotted line, with the area below it shaded.

The X-Ray prints the selected expiration's flip with its distance from the current price, as a share of the price: 751.08 (−0.6%) means the flip sits 0.6% below the price.

Why it matters

Above the flip, gamma is positive: market makers buy dips and sell rises, which keeps the price in a range and makes walls more reliable. Below it, gamma is negative: they sell into drops and buy into rises, so moves can run further and faster.

Price vs the flipTypical behaviour
AboveCalmer, moves tend to be smaller and pulled back toward the middle
Below (shaded)Jumpier, moves tend to be larger and can follow through

Quick test — is the price, or a wall, in the shaded zone?

Calm — Price and both walls are above the shading. Hedging damps moves, so the walls tend to hold.
Fragile — Price sits at the edge of the shading and the put wall is inside it (faded). A small drop changes the picture.
Jumpy — Price and both walls are inside the shading. Hedging adds to moves, and walls are easier to break.

How it is found

Mellow recalculates the total gamma of all open options at a range of possible prices and finds where it crosses zero. Each expiration has its own flip. Only the Next one is used by the state: price above it with negative gamma turns a Reversing reading into Uptrend.

Limits

  • Treat it as a zone, not an exact price.
  • It assumes market makers are long the calls and short the puts. That fits single stocks with few options least well.
  • It comes from yesterday's open interest, repriced at today's price.

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