Zero Gamma (Gamma Flip) Explained
Zero Gamma is the price at which the total gamma of options dealers, added across every strike, changes from positive to negative or the other way around. Traders also call it the gamma flip. Above or below it, dealer hedging tends to change character: it dampens moves on one side and amplifies them on the other.
On this page
What is Zero Gamma?
Options give their holders a sensitivity to price changes called gamma. Dealers (the firms on the other side of option trades) must keep their exposure balanced, so gamma shapes how much they buy or sell as price moves. If you add up all that gamma at one price, you get a single number. Do it at many prices and the total usually moves from positive near the biggest strikes to negative far away from them.
The price where that total passes through zero is the Zero Gamma level. It is not a fixed property of the index: it moves every day as options expire, open interest changes and new contracts are quoted. If you are new to gamma, start with What is gamma exposure.
How is it calculated?
Each open option is turned into a dollar amount of exposure with a simple formula:
Exposure ≈ gamma × open interest × 100 × price² × 0.01
Calls are usually counted positive and puts negative, on the assumption that dealers are long calls and short puts. Then the total is computed at many hypothetical prices, for example from 4,900 to 5,100 in steps of 5 points. Gamma itself depends on how far each strike is from that hypothetical price, so an option close to the money has much more gamma than one far away. The result is a curve; the point where it crosses the zero line is the Zero Gamma.
What happens when price crosses the level?
| Where price is | Total dealer gamma | What tends to happen |
|---|---|---|
| Above the Zero Gamma | Positive | Hedging leans against the move; price often drifts toward large strikes |
| At the Zero Gamma | Near zero | Little hedge pressure either way; the regime is in between |
| Below the Zero Gamma | Negative | Hedging leans with the move; ranges can widen and moves can accelerate |
These are tendencies of the model, not mechanical outcomes. A market below Zero Gamma can stay calm, and a market above it can still trend hard on news.
How do you read it with numbers?
Imagine an index at 5,000. A model computes total exposure of +$400 million per 1% move at 5,000, +$100 million at 4,980 and −$60 million at 4,960. A simple straight line between 4,980 and 4,960 puts zero at about 4,973.
Read in plain words: while price holds above about 4,973, hedging tends to slow moves. If price drops below it, the same book now leans with the move.
Later that day, 2,000 new contracts are opened at the 4,900 strike. Recomputing changes the curve and the Zero Gamma may move a few points. That is why the level is worth checking again after a big options day.
What are the limitations?
- It is an estimate from a model. The result depends on the volatility and time settings used to compute gamma.
- We do not know who bought or sold each option. If the call-positive, put-negative convention is wrong for a large position, the sign of the total can change.
- Open interest is published with a delay. Options opened after the last update are not in the number yet.
- It does not predict price. Zero Gamma describes a change in hedging behavior, not the direction of the next move. Read it with the common mistakes in mind.
See it on the chart
GexFlow draws the Zero Gamma as a labeled horizontal line on your chart, recalculated from the options chain through the day. When price is close to it you can see the total exposure climb toward zero instead of relying on the line alone.
Risk disclosure: GexFlow is an analysis and education tool operated by House Genius LLC. It does not provide investment advice, does not manage money and does not give buy or sell signals. Levels, indicators and statistics describe market conditions and do not predict prices. Trading options involves substantial risk of loss and is not suitable for every investor. Market data may be delayed or inaccurate. © 2026 House Genius LLC.
GexFlow team · Last updated: 2026-10-22 · Pending expert review
Keep reading: What is gamma exposure · Call Wall and Put Wall · Reading SPX levels before the open · See GexFlow pricing.