Due to the nature of gamma, these points are largest where the most options have been sold and bought. And they are easily trackable with a quick check of the open interest. The further the market moves away from these inflection points the less gamma is in the market, decreasing the urge to hedge all the time. It's like wading through a swamp; once the market clears it, things start happening again.
Watch the Market Makers
So why do markets move at all if gamma is, like in this example, the big decelerator? Because it depends who owns it. Market makers use their gamma because they must. There is nothing worse than sitting on a position and bleeding white over time as your options deteriorate. Institutions, on the other hand, do not have to get panicky as they benefit on their sold upside positions over time and use their long, protective position to the downside to insure their portfolio. If they were to do the same as the market makers – trade in and out of positions to utilize their long gamma – they would become neutral, which is clearly not what they wanted by setting up this position in the first place. So, the market downside is now defined by institutions who do not use their long gamma, which would make the market sticky but by market makers who are gamma short.
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