Regime Detection

Positive gamma, negative gamma, or neutral

Regime Detection

GEX Engine classifies the current market into one of three gamma regimes based on aggregate dealer positioning. The regime determines the dominant hedging flow pattern and has direct implications for volatility, price behavior, and strategy selection.

Three Regimes

Positive Gamma

Dealers are net long gamma. Their hedging activity acts as a volatility dampener: they sell into strength and buy into weakness. Price tends to mean-revert and realized volatility compresses. This is the "calm" regime.

Characteristics: low intraday ranges, price gravitating toward high-GEX strikes, failed breakout attempts, and implied volatility trending lower. Range-bound and mean-reversion strategies tend to outperform. Trend-following strategies underperform.

Negative Gamma

Dealers are net short gamma. Their hedging amplifies moves: they must buy as price rises and sell as price falls. Realized volatility expands, and the market becomes prone to trend days and gap moves. This is the "volatile" regime.

Characteristics: large intraday ranges, momentum continuation, price moving quickly through strikes, and implied volatility elevated or rising. Trend-following and breakout strategies tend to outperform. Mean-reversion and short-volatility strategies face outsized risk.

Neutral

Dealer gamma is near zero -- neither strongly positive nor negative. This is a transitional state where small changes in positioning (new option trades, expirations) can tip the regime either way. Market behavior is less predictable and more event-driven.

Characteristics: moderate volatility, mixed intraday patterns, and heightened sensitivity to catalysts. Position sizing should be reduced and conviction should be lower until the regime resolves.

Detection Methodology

Regime is determined by the sign and strength of net gamma exposure relative to historical percentiles. The engine computes a gamma index (normalized GEX) and applies a strength threshold to avoid whipsawing between regimes on noise. An amplification factor indicates how much dealer hedging amplifies or dampens price moves.