This is SpotGamma’s proprietary gamma flip level. When markets are above this level we give markets a bullish edge as dealer hedging flows should help suppress volatility. This is because dealers are selling hedges as the market rallies, and buying them as the market declines.
Conversely, when markets are below the Volatility Trigger level, it suggests dealers have a negative gamma position. Their hedging flow may therefore be in the direction of market trend, selling into declining markets and buying as the market rallies. This may increase overall volatility.
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