What is the difference between negative gamma and positive gamma?

By Daniel, The Philosopher Investor · updated October 2, 2026

What does a positive gamma day look like?

Gaps get filled. An early selloff finds buyers by mid-morning. A rally into a large call strike stalls and drifts back. The daily range is often less than one percent in the index and the close lands near the open. Volatility sellers make money on these days and breakout traders get chopped.

The reason is mechanical. Every tick down obliges dealers to buy a little stock; every tick up obliges them to sell a little. Across a deep options book that is a steady, patient counter-flow. It does not stop a real trend, but it slows one and it smothers the small moves.

What does a negative gamma day look like?

Moves extend. A one percent drop becomes two because the hedging sells into it. A short squeeze runs further than the news justifies. The range is wide, the close is often near the extreme of the day, and the intraday reversals are sharp when they come. Most of the largest single-day moves in the index happen here.

Negative gamma does not pick a direction. It is a volatility regime. The same mechanics that turn a selloff into a rout turn a relief rally into a face-ripper. What it removes is the cushion.

How do you know which regime you are in?

Compare the index price to the zero gamma level published after each close. Above it, positive. Below it, negative. The distance matters too: two percent above the flip is comfortably positive; a few points above it means one bad open changes the regime.

The share of individual stocks in positive gamma is the second read. When most names are positive, the market as a whole is cushioned even if the index sits near its flip. When most are negative, a quiet index can hide violent single-name moves.

What should a trader do differently in each?

In positive gamma, fade extremes and be patient with entries. A gap up into a call wall is a place to trim, never to chase. Stops can be tighter because the range is narrower, and targets closer because rallies stall at the walls.

In negative gamma, respect the trend and size down. The same stop distance is hit far more often, so either widen it or cut the position. Targets can be further, because moves extend. And be wary of the mean-reversion habits that worked last week; they are the ones that get punished when the sign flips.

How does the regime change?

Slowly through expiration and quickly through price. Monthly and quarterly option expirations remove large blocks of open interest and can shift the zero gamma level by several percent overnight. That is why the days after a big expiration often feel different from the days before it.

Price crossing the flip is the fast route. A negative gamma regime that starts with a Monday gap down can be over by Wednesday if the index reclaims the level, because the same open interest is now hedged the other way. The level is the thing to watch.

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