Negative gamma

Negative gamma is read the same way as its counterpart, off the aggregate net GEX figure across a ticker's options chain, just with the sign flipped. When that figure is negative, dealers are net short gamma as a group. As with positive gamma, it's a snapshot built from current open interest and positioning across every strike, not a forecast of what happens next, and the size of the negative reading scales how forceful the amplifying effect tends to be.

In a negative gamma regime, dealer hedging adds fuel to momentum instead of absorbing it. As price falls, dealers short that gamma sell more of the underlying to stay hedged, adding to the decline. As price rises, the same mechanism buys into the rally, adding to the upside. That's the mechanical explanation behind why sharp sell-offs, and sharp melt-ups, so often coincide with a market trading below its zero-gamma flip line: the hedging flow that would normally cushion the move is instead pushing in the same direction.

Negative gamma explains a mechanism for amplification, not a prediction of when or whether a move actually starts. A name can sit in negative gamma for an extended stretch without any dramatic price action if nothing triggers a real move in the first place; the regime describes vulnerability to acceleration, not a standing forecast of a crash. It also, like positive gamma, says nothing about direction on its own. Negative gamma amplifies whatever is already happening, up or down, and shouldn't be read as an inherently bearish signal just because it's the regime most associated with volatile sell-offs.

Consider a stock at $118 that drifts down through its zero-gamma flip line at $115 on a soft guidance update. Once below that line, the options profile flips negative, and dealers hedging their short gamma start selling into further weakness rather than buying it, a mechanism that can turn an ordinary 2% pullback into a much sharper 6% or 7% slide within the same session. The same setup in reverse, a name grinding higher through its flip line on a short squeeze, would see dealer buying add to the upside instead, producing the kind of fast melt-up negative gamma is equally capable of producing.