A good primer on market gamma from BI:
So why do markets move at all if gamma is, like in this example, the big decelerator? Because it depends who owns it. Market makers use their gamma because they must. There is nothing worse than sitting on a position and bleeding white over time as your options deteriorate. Institutions, on the other hand, do not have to get panicky as they benefit on their sold upside positions over time and use their long, protective position to the downside to insure their portfolio. If they were to do the same as the market makers – trade in and out of positions to utilize their long gamma – they would become neutral, which is clearly not what they wanted by setting up this position in the first place. So, the market downside is now defined by institutions who do not use their long gamma, which would make the market sticky but by market makers who are gamma short.
