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What is the Gamma Heatmap?

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The gamma lens is most useful in helping you anticipate local areas of higher or lower realized volatility. The relative strength of a gamma zone is shown by the depth of color with the strongest levels showing as dark blue or dark red.

Image description: Gamma Heatmap from August 26, 2024 shows price trend towards 5520 strike with major positive gamma.

 

Key Features

You can use the heatmap colors to infer potential zones where price action may change. The below guidelines are based on the default Market Maker positioning.

  • Blue Zones: Lower expected volatility   (positive market maker gamma)
  • Red Zones: Higher expected volatility  (negative market maker gamma) 
  • White Zones: Transition zone (more neutral, little hedging [light mode])
  • Black Zones: Transition zone (more neutral, little hedging [dark mode])

The TRACE gamma heatmap is highly informative for day traders to anticipate volatility or stability. For swing traders, the 5-day forward projection accessible via the calendar dropdown can help anticipate the range of price movement over multiple days.

 

Trading with the Gamma Heatmap

The gamma lens is the best way to start evaluating areas of intraday stability vs. volatility. Price tends to move swiftly through areas where Market Makers hold neutral to negative gamma, and find support or resistance at areas where Market Makers hold positive gamma.

  • Pinning: More likely in a blue zone (highest impact at the EOD)
  • Volatility: More likely in a red zone (highest impact at the EOD)


If you are interested in learning more about TRACE, check out the full TRACE User Manual.

SpotGamma Alpha subscribers can access SpotGamma TRACE here.

 

TRACE can be access by SpotGamma Alpha subscribers here.

 

Support articles explain the mechanics. The TRACE product page shows how traders use this context daily — with real market scenarios and a clear breakdown of you can improve your entries rather than chasing moves.


 

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