⚡ QUICK ANSWER: Long Gamma vs Short Gamma Regimes
In a Long Gamma Regime (Net GEX > 0), market makers counter-trade price movements by selling rallies and buying dips, compressing volatility. In a Short Gamma Regime (Net GEX < 0), market makers trade in the direction of the market by selling selloffs and buying rallies, expanding volatility and triggering sharp directional momentum.
1. Long Gamma: The Volatility Suppressor
When the public holds net long puts or net short calls, dealers are overall Long Gamma. Dealer delta-hedging acts as a natural market buffer:
- Rallies Get Sold: As NIFTY spot rises, dealer call delta increases. Dealers must sell underlying futures to remain delta-neutral.
- Dips Get Bought: As spot falls, dealer put delta increases. Dealers must buy underlying futures, creating strong buying support near Put Walls.
2. Short Gamma: The Momentum Accelerator
When the public holds net long calls or net short puts, dealers enter a Short Gamma regime. Dealer hedging accelerates price action:
- Cascading Selloffs: As NIFTY spot dips below ZGL, dealer short put deltas expand rapidly. Dealers are forced to sell futures into an already falling market, causing rapid intraday crashes.
- Melt-Up Breakouts: As spot surges past Call Walls, dealer short call deltas spike. Dealers must buy futures aggressively, fueling explosive upside squeezes.
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