The SpotGamma Gamma Index™ is displayed each day in our Founder’s Notes as a proprietary measurement of the total amount of market gamma. However we take a unique and detailed approach to this oscillator by calculating market marker profits and losses based on the modeled data.

A large positive reading is a forecast that future realized volatility (the actual percentage range of the trading action) will be relatively low with smaller trading ranges. And a large negative figure suggests that future realized volatility will be high with larger trading ranges. The range of the SpotGamma Gamma Index™ is from -4 to 4.

Intermediate: Strategy

When there is a large positive reading, traders might find edges in playing for smaller, mean reversion trades and premium-selling strategies. This is because it could be reasonably assumed that current prices are well supported by sticky pinning from options market maker hedging (rebalancing efforts intended to neutralize risks). Alternatively, and as long as risk is managed well, then being aware of strongly negative market gamma readings can create opportunities for momentum or long convexity strategies, which are more likely to thrive in those conditions.