2.5.3 Gamma Neutral (GN)

Gamma Neutral (GN) is the spot price where the market maker portfolio transitions from negative to positive under naïve assumptions (all calls sold, all puts bought). Above GN, the market tends to have lower volatility as market maker gamma is positive, and below GN negative MM gamma creates volatility. This point is commonly defended to the downside as long underlying, short volatility positions seek to maintain their positions and prevent falling into a negative gamma environment.