Options Interpretation Guide
How to read dealer positioning, gamma exposure, and volatility structure.
1. Single Indicators
Gamma Regime
+γ PinDealers LONG gamma — they sell rallies and buy dips. Price range-bound, mean-reverting. Breakouts get absorbed.
-γ AccelDealers SHORT gamma — they chase price in both directions. Moves amplified. Rallies and selloffs accelerate.
Net GEX (Gamma Exposure)
>> $1B: Strong pinning. Very hard to break out.
$0-500M: Mild dampening. Moves possible but slower.
Near zero: Neutral. Pure supply/demand.
< $0: Acceleration zone. Dealers chase, amplifying moves.
Gamma Flip Level
The price where net GEX crosses from positive to negative.
Price well above flip (>5%): Safely pinned. Need big catalyst to break.
Price near flip (<3%): Danger zone. Small move could switch regime.
Price below flip: In acceleration territory. Flip becomes resistance.
Call Wall & Put Wall
Call Wall — Strike with highest call gamma. Acts as resistance — dealers sell as price approaches.
Put Wall — Strike with highest put gamma. Acts as support — dealers buy as price approaches.
Walls far apart → wide expected range, room to move.
Walls close together → tight range, price pinned between walls.
IV vs HV (Implied vs Realized Volatility)
IV >> HVExpensive: Options overpriced vs actual movement. Sell premium.
IV ≈ HVFair: Options fairly priced. No vol edge — trade direction only.
IV < <HVCheap: Options underpriced. Buy options — you get more movement than you pay for.
Dealer Hedging Scenarios
| Scenario | +γ | -γ |
|---|---|---|
| ▲ +1% | Dealers SELL (dampens rally) | Dealers BUY (amplifies rally) |
| ▼ -1% | Dealers BUY (cushions drop) | Dealers SELL (accelerates drop) |
Vanna & Charm
Vanna (+) — VIX drops → dealers buy shares → supports price upside
Vanna (-) — VIX drops → dealers sell shares → pressures price
Charm (-) — Time passes → dealers sell into close → end-of-day pressure
Charm (+) — Time passes → dealers buy into close → end-of-day support
2. Combination Signals
Index Combinations (SPY, QQQ, SMH)
+γ + IV cheap + near call wall → Pinned below resistance, options cheap. Buy calls targeting wall break — cheap asymmetric bet.
-γ + IV expensive + below put wall → Accelerating down, options overpriced. Avoid buying puts. Wait for stabilization.
-γ + IV cheap → RARE — acceleration with cheap options. High conviction directional bet.
+γ + near gamma flip + VIX rising → Regime change imminent. Reduce size. If flip breaks, acceleration follows.
+γ + pin risk >70 + 0DTE >30% → Pinned today, volatile close. Avoid last 90 min entries.
Individual Stock Combinations
-γ + breakout signal + IV cheap → BEST CASE: triple alignment. Buy calls or stock. Highest conviction.
+γ + call wall at round number → Strong ceiling. Sell calls at wall or wait for volume break.
-γ + high short interest → Short squeeze candidate. Explosive upside potential.
+γ + put wall support + IV cheap → Floored by dealers, options cheap. Buy calls — structural support.
-γ + charm negative + into close → Accelerating down into close. Expect gap down tomorrow.
IV expensive + earnings soon → Sell premium before earnings. IV will crush post-event.
IV cheap + post-earnings → Vol crushed. Buy options for next catalyst. Cheap entry.
3. Regime Transitions
+γ → -γ (Breaking Down Through Gamma Flip)
Price drops to gamma flip → dealers switch from buying dips to selling dips → selling accelerates → volume spikes → cascades to put wall or beyond. Action: Tighten stops to flip level. If break confirmed, buy puts (acceleration will juice them).
-γ → +γ (Reclaiming Gamma Flip)
Price rallies above flip → dealers switch from chasing to dampening → vol compresses → price stabilizes near call wall. Action: Vol crush coming — don't buy expensive options. Sell premium. Expect range-bound.
4. Quick Reference
1. REGIME
+γ Pin → calm, dealers absorb moves
Near call wall? → resistance, sell calls
Near flip? → watch for breakdown
IV cheap? → buy options for breakout
-γ Accel → volatile, dealers amplify
Trending up? → ride it, dealers buying with you
Trending down? → don't fight it
IV cheap? → BEST CASE, buy directional
2. VRP
Cheap → buy options (underpriced)
Fair → no vol edge
Expensive → sell premium
3. WALLS
Near call wall → resistance (+γ) or breakout target (-γ)
Near put wall → support (+γ) or breakdown level (-γ)
4. 0DTE
Pin risk >70 → expect pinning at close
0DTE >30% → volatile last hour