The VIX Dealer Gamma Radar ranks daily net dealer gamma in a trailing 6-month window and filters by VIX regime to project forward VIX spike probabilities.
1. Conceptual Hierarchy
When institutional traders buy or sell VIX options, market makers absorb the inventory. Net Dealer Gamma (Net GEX) aggregates all open options contracts into a single metric representing dealer hedging pressure.
Options are traded, dealers carry what is left over, and net GEX is the size of that carried position. This tool reads the bottom level and asks what spot VIX did next.
Spot VIX = 18.70: Establishes a Calm Regime (classified as any spot reading below 20.00).
High Net GEX Percentile: Signals heavy dealer option positioning, indicating significant hedging pressure that can influence market stability.
Low Net GEX Percentile: Signals light dealer positioning, leaving spot VIX more sensitive to sudden shifts in order flow.
2. Baseline System Inputs
The system captures two live metrics from the current session:
System Inputs = ( VIX Net GEX , Spot VIX Regime )
Example Input Pair: ( 8,995,477 Net GEX , Calm Regime (VIX = 18.70) )
Because total open interest in options markets expands and contracts over multi-year cycles, raw gamma figures cannot be compared directly across different years. To ensure consistency, the analyzer calculates a rolling 6-month percentile rank and applies a Dual-Variable Matching Protocol.
1. Trailing 6-Month Percentile Calculation
Each session's absolute net gamma is evaluated strictly against the preceding 126 trading days (roughly 6 calendar months). This rolling structure prevents historical look-ahead bias:
GEX Percentile = ( Count of Prior 126 Sessions with |Net GEXhist| < |Net GEXcurrent| / 126 ) × 100
Example Execution: 8,995,477 Net GEX ⇒ 70th Percentile
The rank is taken inside a window that rolls forward with each session, which keeps an early reading and a recent one comparable even though the absolute gamma figures differ.
2. Dual-Variable Matching Protocol
Candidate historical days must satisfy two independent constraints simultaneously to enter the model's analytical sample:
Both constraints have to hold on the same session for it to enter the sample. On this reading every matched day sits in the calm regime, with spot VIX between 12.03 and 19.84.
Why Split by VIX Regime?
Dealer gamma behaves differently depending on broad market volatility. A high gamma reading during a calm market (VIX < 20) reflects a completely different market structure than the same reading during a severe stress event (VIX ≥ 20). Splitting by regime prevents conflicting market signals from distorting the forward probabilities.
Chapter 3
Cumulative Intraday Spike Probabilities
The Spike Probability Engine evaluates how often matched historical sessions reached specific point-expansion targets across three forward time frames: 5, 10, and 20 trading days.
1. Intraday "Touch" Logic
Threshold breaches are triggered the instant spot VIX touches a target level during trading hours. The system does not require VIX to hold or close at that level.
Upward Targets: Triggered if the intraday High reaches or crosses the target.
Downward Targets: Triggered if the intraday Low reaches or touches the lower threshold.
This path hits the target early in the window and then closes lower than it started. The touch is what gets recorded, so the session still counts toward that level.
Rule
Any intraday touch registers as a valid historical breach across all active forward windows (5, 10, or 20 days), even if VIX completely reverses by the end of the session.
The Setup Log details every historical trading session that matched both active search parameters: the GEX Percentile and the VIX Regime Filter.
The Columns
Column Header
Definition
Analytical Value
Date
Historical trading session timestamp.
Verifies distribution across different macro cycles.
VIX
Closing spot VIX on the matched date.
Confirms all rows share the same VIX regime.
Net GEX
Total dollar gamma position carried by dealers.
Displays the raw positioning figure behind the rank.
GEX Percentile
Trailing 6-month percentile rank of absolute Net GEX.
Verifies exact alignment with the target percentile.
Highest VIX Move
Max intraday point expansion above entry across 5/10/20 sessions.
Provides the underlying data for the probability engine.
Interpretation Rules
"Never Went Higher": Indicates that spot VIX did not trade above its entry session closing price at any point during the forward window.
Pending Status: Flags recent historical sessions whose 5-, 10-, or 20-day forward tracking windows are still ongoing.
Distribution Skew: Comparing average peak moves to median peak moves helps determine whether average return figures are driven by a few extreme outliers or consistent market behavior.
Example Skew Analysis
In this matched sample, the median peak 20-day move was +4.97 points, while the maximum peak move reached +51.25 points (from a July 2024 volatility squeeze). Sorting by the 20-day column isolates these tail-risk events.