Options market makers aim to earn a spread rather than bet on direction, so they hedge. Those hedges, repeated across billions of dollars of positions, can move the spot market.
Long and short gamma
If dealers are net long gamma, their delta hedging leans against moves: they sell into rallies and buy into dips, which tends to dampen volatility and can pin the price near a large strike. If they're net short gamma, they have to buy into rallies and sell into falls, which amplifies moves.
Gamma exposure estimates
Gamma exposure charts add up the gamma across strikes and show where it changes sign, the "gamma flip". The catch is that positions don't come labelled. The estimate depends on an assumption about who is long and who is short, usually that customers buy options and dealers sell them, or a split based on trade direction. If that assumption is wrong, the sign can be wrong too.
How to use it
Treat gamma as a description of the likely mood of the tape, more useful for "range or breakout?" than for direction. It matters most around big strikes in the days before a large expiry, and it fades once positions expire.
