The sign of the net open-interest gamma is the one options signal with papers behind it: when dealers are net short gamma, their hedges chase the move, and on our archive 30-minute realized volatility ran 1.4 times higher below the flip than above it. That much was known. What we wanted to know was simpler and more useful: at a level, do you fade or do you go with the break, do you buy or do you sell, and does the answer change with the regime?
How it was measured
- 88 SPX sessions replayed on ES and 82 NDX sessions on NQ, one-minute bars, the level mapped with the previous minute’s basis, costs in, stop checked before target inside a bar.
- Every contact of every level — the two majors, the walls, both zero gammas, prior day high and low, the expected move, the opening range — played twice: as a fade (limit at the level, against the move) and as a breakout (the first one-minute close through the level, with the move).
- One stop, 0.10 % of spot (about 8 ES points, 28 NQ), a target of 1.5 times the stop, and a control that held to 15:55 with the stop only. No grid, no parameter search, a placebo at the same distance for every line, 30 % of dates held out.
The regime decided the side
In positive gamma, buying the dips at a level paid on both indices and selling the rallies lost: on NQ the long fade ran a profit factor of 1.34 against 1.05 for the short, and held to the close 1.28 against 0.79. In negative gamma the picture reversed — the long fade fell to 0.61 held to the close, while the short paid 1.33 at 1.5 R. The placebo short paid too, which is the honest reading: on a trend day the side mattered more than the exact strike.
Fade, not breakout
Breakouts were rare — one combination in the whole study reached a hundred events — and they did not beat a short taken anywhere else. They produced about 1.3 trades a day against 2.7 to 3.4 for fades. A one-minute close through a level tells you that level is not to be faded again today; it did not, on this archive, make a trade of its own.
The first read
The single best cell was the volume zero gamma reached from above in positive gamma — the dip back to it, bought: 1.68 against a placebo of 0.90, 56 % of trades reaching 1.5 R, about 1.2 of them a day. The majors and the walls followed the regime rule but did not have a hundred events each on their own, so they are the second read, not the first.