Dealer Flow Risk
Canonical definition, formula, interpretation, and API reference.
Definition
0-100 score measuring risk that dealer hedging will move against your short-vol position.
Formula
Composite of gamma stress, hedging imbalance, flow velocity
Higher = more risk from dealer flows.
Inputs
gamma regimehedging estimatesGEX velocity
Output
dealer_flow_risk (0-100)
Interpretation
- <30: low risk - dealers comfortable
- 30-60: moderate stress
- >60: high - dealers stressed, may amplify moves
API Reference
Endpoint
GET /v1/vrp/{symbol}
Tier
Alpha+
Response field
dealer_flow_risk
Why Dealer Flow Risk Matters for Trading
TL;DR
Dealer flow risk is a 0-100 score of whether dealer hedging will work with or against a short-vol trade. High = hedging amplifies your pain. Low = it dampens it.
- What it measures
- Composite score measuring the expected directionality and magnitude of dealer hedging flow against a typical premium-selling book.
- What it signals
- The non-discretionary flow you're trading against.
- Why we measure it
- A great harvest score is worthless if dealer flow runs over you. Flow risk is the risk-side companion to the reward-side harvest.
- Who uses it
- Systematic vol sellers, options-flow quants. ALPHA TIER.
How to read Dealer Flow Risk
Low (< 30)
- Dealer flow aligned or benign
- Trades can hold size
- Harvest strategies supported
- Best risk environment
Good for: full-size premium sells
High (> 70)
- Dealer flow actively hurts short vol
- Expect unpleasant re-hedging
- Reduce size aggressively
- Avoid during vol regime shifts
Bad for: short vol - warning
Mid (30-70)
- Typical flow environment
- Normal sizing
- Watch for regime shifts
- Default reading
Typical
Rules of thumb
- Reward and risk together. Harvest × (1 - flow risk) is the cleanest 'net harvest' heuristic.
- Spikes around OPEX. Large dealer inventories unwind - flow risk elevates Thu/Fri of expiry week.
- Pair with regime. High flow risk + negative gamma = worst short-vol setup.
- Event-sensitive. CPI, FOMC, earnings routinely push flow risk high intraday.
- Alpha-tier signal. Not available in free/basic tiers.
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