Positive Gamma (Long Gamma)
Dealers are net long gamma — they stabilize price by buying dips and selling rallies.
In a positive gamma environment, market makers are net long gamma. Their hedging activity dampens price movements:
- Price drops → dealers buy (supporting price)
- Price rises → dealers sell (capping upside)
Result: Low volatility, range-bound action, mean reversion. Ideal for selling premium and fading extremes.
See also: Negative Gamma (Short Gamma), Stability Point (S)