SVQ · Dealer positioning
Gamma flip (gamma balance point)
Also called: dealer gamma flip, zero-gamma level, gamma balance point
The gamma flip is the underlying price at which estimated net dealer gamma crosses zero, separating damping from amplifying hedge flows.
Definition
The gamma flip, also called the zero-gamma level or gamma balance point, is the hypothetical underlying price at which aggregate net dealer gamma exposure changes sign. Above it, dealers are estimated to be net long gamma; below it, net short gamma (or the reverse, depending on how the book is positioned).
It is a derived level: you find it by re-pricing the whole options book across a grid of hypothetical spot prices and locating where net GEX crosses zero.
Intuition
Gamma exposure changes as spot moves because each option's gamma depends on how close it is to the money. A book that is net long gamma at today's price can become net short gamma if price falls into a region dominated by dealer-short puts.
The flip therefore marks a boundary between two hedging regimes. On one side, hedging tends to lean against moves and realized volatility is often lower; on the other, hedging leans with moves and realized volatility can expand. That is why traders track how far spot sits from the flip, not just the GEX number itself.
How it's calculated
Fix today's open interest and implied volatilities. For each candidate spot price S′ on a grid:
NetGEX(S′) = ΣK,T signK,T × Γ(S′, K, T, σK,T) × OIK,T × multiplier × S′² × 0.01
The gamma flip is the S′ where NetGEX(S′) = 0, found by interpolating between the two grid points where the sign changes. Some implementations also shift implied volatility with spot (sticky-delta rather than sticky-strike), which moves the result.
If net GEX never changes sign over a reasonable range, there is no meaningful flip and a good tool should say so rather than force one.
How to read it
Spot well above a flip, with large positive net GEX, describes a book where hedging is estimated to damp moves. Spot near or below the flip describes a more fragile setup where hedging could add to moves.
The level is recomputed whenever open interest, implied volatility or the expiry set changes, so it can migrate day to day. Read it as a conditional statement about hedging flows under stated assumptions, not as a price target.
Common mistakes
- Reading the flip as a line price must respect. It is a model boundary between hedging regimes, not a barrier.
- Ignoring that the level depends on the dealer-side assumption and on how implied volatility is assumed to move with spot.
- Using a stale flip after a large expiry. Same-day and weekly options can dominate gamma and remove much of it at expiration.
- Assuming the flip exists. Some books stay one sign across any plausible price range.
In Saqrid
SVQ's gamma exposure playbook reports a gamma balance point next to call and put concentration and a concentration-strength score, with IF/THEN scenario cards rather than price targets.
Open SVQ.
Go deeper
Saqrid Institute lesson: Gamma Exposure (GEX) & Dealer Hedging. Lesson text is open to read without an account.