# Absolute Gamma

## Basic Points

- Absolute gamma is the strike with the largest total gamma.
- It can be treated as a strong support/resistance level and a magnet.
- It is also normal for this level to be near an inflection point like Zero Gamma rather than near the far edges of the trading range.

## Intermediate: Gamma

Gamma means the acceleration of directional exposure; what it ultimately means when dealers are net long gamma is that the underlying security’s price more readily sticks to major levels. This is because dealers are trading in the opposite direction of the underlying security’s trend when they are heavily long gamma. Absolute gamma therefore is where price can be expected to be the stickiest, which is what is meant by a “sticky pin” on a key level.

## Advanced: The Logic of Absolute Gamma

Absolute gamma tends to be at or near Zero Gamma (the inflection point between positive and negative market gamma) because it is taking the difference of one side from the other.

Absolute gamma is only used on index products, and on index products we model puts to have negative market gamma and calls to have positive market gamma. In order for this calculation to be the difference of one side from the other, and with put gamma being negative, we need to add the absolute value of put gamma to the absolute value of call gamma.

<*SpotGamma Gamma Chart>*