Dealer gamma / GEX

When dealers are net long gamma, meaning they've sold more optionality than they've bought and the market is mostly buying protection, a rally forces them to sell into strength, a drop forces them to buy into weakness, and that hedging flow leans against whatever direction started it, compressing range and producing the grinding, low-drama sessions traders call pinned. Flip the sign and the mechanism reverses. Short-gamma dealers sell into falling prices and buy into rising ones, adding force to whichever direction already has the ball. Same market structure, opposite consequence.

Aggregate dealer gamma isn't a bet on where price goes next. It's a state variable for how the market behaves once it's moving, a volatility regime sitting underneath the price action and separate from it. A long-gamma tape muffles news into a shrug. A short-gamma tape turns the same headline into a gap.

That fits a pattern we see across conditioning variables in general: they describe the second moment (how wide the range runs, how likely a big move gets) far more reliably than they describe which way price closes. A short-gamma reading raises the odds of a violent session without saying whether that session ends up or down. Direction stays close to a coin flip either way.

Keep it separate from the volatility risk premium. VRP is a slow, structural gap between what options imply and what markets actually deliver, collected over months. Dealer gamma runs on a much shorter clock: who has to hedge, and how, over the next few hours or days.

None of it is informational. Dealers aren't forecasting anything; they're offsetting risk on positions their clients already put on them, and that offsetting is what moves the underlying. It's plumbing. Useful for sizing how rough a session might get, of no help guessing which way it ends.