Dealer Cushion
Canonical definition, formula, interpretation, and API reference.
A composite read on dealer positioning. Combines net gamma exposure, the gamma regime (positive or negative), and distance from spot to the gamma flip into one row. Quantifies how much dealer hedging will dampen the next move.
? distance_to_flip_pct · sign(NetGEX)
: fragile
Strength scales with magnitude of NetGEX and percentage distance above the flip.
- Positive GEX + spot well above flip: dealers dampen moves, range-bound
- Positive GEX + spot near flip: cushion thin, regime fragile
- Negative GEX: cushion absent, dealer hedging amplifies moves
API Reference
Why Dealer Cushion Matters for Trading
When dealers are long gamma and spot is above the flip, they buy dips and sell rips. That dampens moves. When spot approaches the flip, the cushion evaporates and a regime change becomes a real risk.
How to read the cushion
- Net GEX strongly positive
- Spot > 0.5% above flip
- Mean-reverting tape
- Range and short-premium friendly
- Net GEX positive but small
- Spot within 0.3% of flip
- Regime stability low
- Vol expansion risk
- Net GEX negative
- Spot below flip
- Dealers amplify moves
- Momentum tape
Rules of thumb
- Cushion is the headline. Read it first, then look at walls, pin, and flow.
- Distance to flip in σ is sharper than percent. Use gamma flip distance in remaining-day sigmas when available.
- Confirm with regime. A long-gamma label without a spot-above-flip check is incomplete.
- Trend reversal warning. A 5-day cushion uptrend that breaks usually precedes a regime flip.
Related Concepts
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