VS3D Onboarding Guide
Volsignals 3D — Dealer Exposure Analytics Platform
Companion Guide: The Official VS3D Annotated Guide (August 2026)
In August 2026 VolSignals published its own screen-by-screen walkthrough of the platform: VS3D | The Annotated Guide — 16 annotated screens covering every panel, callout, and setting, with Dan's own Discord notes quoted throughout. Its Resources page credits and links this community guide as the framework companion to those screens. The two are complements: Dan's guide is organized by screen, this one by concept. Material from his guide has been folded into the chapters below as dated additions, so both stay in sync.
Dan was a market maker for ~15 years, a partner and lead trader in the SPX at Belvedere Trading. He worked on the floor and upstairs, oversaw deployment of hedging algorithms and execution algorithms, and managed large positions. His direct experience showed him that dealer hedging flows have a measurable, mechanical impact on the market.
Matt came from the sell side, spending his career at JP Morgan, Morgan Stanley, RBC, SocGen, Credit Suisse, and UBS, managing large volatility books on the index side.
Key Insight
Options are a conditional expression of behavior. When you sell someone a call, you're committing to sell the market if it gets there. The dynamic hedging desk replicates this process continuously, and those flows impact the market in predictable ways.
From the desk — Foundry interview
Dan left Belvedere after growing frustrated with institutional rigidity. He created their internal training program, was the youngest capital partner in their history, and spent his entire career as lead index trader in SPX. VS3D was built around one question: “What tool would I want if I were trading this myself?”
Why They Trust the Hedging Influence
The founders' conviction is first-hand: “We know there's an influence there because we've suffered from the adverse selection ourselves — we watch positions go against us because of our hedging.” Dan started trading March 24, 2008, and was “the futures guy until 2009,” experiencing the GFC from the front row: “Not a good thing for options sellers. I have that in my genes. I don't like to sell options.”
The old method involved taking free OCC open interest data (published on a delay, once per day) and mapping a “long call / short put = market maker” assumption on top of it. This produced massively inflated numbers — Bank of America's analysis showed multiples upon multiples of the real gamma.
Adding bid-ask inference (“close to bid = customer sold, close to offer = customer bought”) isn't robust either, especially for the S&P 500. The CBOE reports massive volumes with system-leg matching, algorithm-matched spreads from the complex order book, and delta hedging that can bias interpretation backwards on important trades.
Important
“Naive gamma was so entrenched… we were swimming in downside gamma and it was not like what people thought we had at all.” — Dan, referencing his 2018 market-making experience where public gamma assumptions were completely wrong.
The Iron Condor Example
A 5-point iron condor is technically the most riskless options trade from an option structure perspective. Market makers trade thousands of these for a nickel of edge with virtually no gamma — the delta difference between strikes is tiny (e.g., a 16 delta vs. a 17 delta call spread). There's “no risk until the last two or three hours” near expiration. But the naive OI model treats both short puts as “dealer short,” creating gross exaggerations of gamma that never actually existed in the hedging profile.
Adverse Selection with Bid-Ask Inference
Dan's 2018 example: he had to sell nearly 5,000 futures against a trade. By the time it hit time & sales and was reported on CBOE's quotes, the reference index had dropped $6–7, completely skewing the bid-ask midpoint and making the trade look like the opposite of what it was. The CBOE's algorithm assigns individual prices to complex spread legs — “hundreds of strategies with 10 legs” on the complex order book — without caring about accurate buy/sell inference. “They'd rather you don't get that information, probably.”
The “Two Questions” Framework
Building accurate gamma data requires answering two questions: (1) Which portion of open interest is held by entities that are actually hedging it? Not everything is hedged — if neither counterparty hedges, the flow “disappears” with no downstream influence. (2) Whether the hedger is long or short the option? “If you start with the wrong position, you don't get the right answer.” VS3D's exchange-level clearing data directly answers both.
Even 100% Direction Accuracy Would Still Be Junk
In the July 2026 onboarding sessions Dan went further on inference platforms: “Even if they got the direction 100% correct, which I promise you nobody does — even if they did, you'd have junk data.” Direction alone can't tell you which kind of entity holds the trade: “It's not just direction of a trade that's super important… it's also which kind of entity holds the trade… when a customer trades against a customer, you have to be able to assume that that's kind of a wash” — neither side dynamically hedges, so there is no hedging influence to track.
The Tape Is Already Hedged — Trade the Next Step
“It's always, always, always true that if you can see the position in any kind of reportable data, it's already been hedged. So just remember that we focus on what's the next step in the hedging path, because that is predictable in some sense.” That next step is where the edge lives: “As soon as you strap a hedging model on a big position, you've instantaneously introduced a divergence from that probability distribution. And that's edge. That difference is your edge.”
VS3D uses OCC and CBOE exchange-level clearing data that provides a summary by participant type: customer buys, non-customer buys, firm sales, market maker sales. The exchange tells you the answer — there is no guessing.
This data is expensive and not freely available. It ensures that VS3D tracks only positions actually held by hedgers, filtering out market-maker-on-market-maker volume (which often shows as massive volume on the tape but nets to zero influence).
Definition — Net Hedgeable Quantity
The imbalance after netting all market-maker-on-market-maker volume. Over 120,000 contracts may trade on a single strike, but only ~1% might land as an actual imbalance on the dealer book. That small imbalance produces meaningful distortion in the market.
Key Insight
“This rivals the information that we get at a market-making desk. The only way to get better would be to trade the order flow yourself and get the CBOE's clearing acknowledgment.”
Exchange-Signed Data, Built From the Contract's First Trade
Dan calls the raw feed “exchange signed”: “They don't actually give you the positions. You have to do that work yourself. They just give you the inputs necessary… a stream of files rooted in volume by participant type by direction” (the C1 CBOE signed-participant-volume series). From there, “we can then iterate from the start of the contract's life cycle and build up through time to get the position right now” — by amassing “tens of thousands of files.” “This is not naive. This is not inference… why don't you just get the answer from the source? Because that's what we do.”
Coverage is the full complex: every SPX option listed on the CBOE, including expirations after 2030, plus flex options. “There's some big positions built into Flex. And so we have those too, whereas others don't” — positions Dan says “will have serious influence and they're also very stable.”
Why Updates Arrive Every 10 Minutes, Not Every 1
“We get updates every 10 minutes… There's a reason we don't give you one-minute updates — one-minute updates are not correct.” VS3D subscribed to the CBOE's one-minute series to test it, watched the positions deviate, and took it back to the exchange, which acknowledged “there's a problem with the construction of the series that is actually in the specifications” — it cannot build correct positions, and “the incorrectness doesn't go away. It actually compounds over time.” One group member's tracked win rate “went from like an 80% win rate to like a 60 or 50% win rate” after a competitor moved to one-minute updates; back on VS3D, “it went right back to normal.” Dan's bottom line: “Don't believe you can have good outcomes if you have wrong positions, because everything downstream of the position is the hedging.”
VS3D focuses on three Greeks that produce the dominant hedging flows:
1. Gamma (Primary)
D-Delta / D-Spot
How delta changes per $1 move. Tells you behavior (support/resistance), not direction. Creates the most immediate, largest hedging flows.
2. Charm (Secondary)
D-Delta / D-Time
How delta changes as time passes. Actually directional — creates passive buying or selling bias as options decay. Most powerful in afternoons.
3. Vanna (Tertiary)
D-Delta / D-Vol
Like charm but driven by volatility instead of time. Can go both ways (vol can rise or fall). Less directly tradable on zero-day; improvements coming.
Think in One Shape, Not Fifteen Greeks
Dan's advice for internalizing these: “I try to think of the Greeks as not individual artifacts or like siloed things. You try to understand them as intuitively as possible, as like a three-dimensional object that, when one changes, the other has an effect also — and the more you do that, the more it will make sense.” And upstream of all of them: “Start with the distribution. Understand that the Greeks are a simple representation of the distribution… You don't need to have 15 names for all the different variables if you understand the shape and how it moves.”
VS3D Concept Overview — Data foundation feeds Greek analysis, which drives the trading framework
The Homepage Is Dan's Own Dashboard
“Your homepage is actually just my dashboard. It's my preferred dashboard… it gives me everything I need to know to trade.” By default: zero-day market maker positions on the left, gamma of the entire position on the top right, and charm of the entire position on the bottom right. Read all of it from one perspective: “You're looking at this platform through the eyes of a market maker generally, because you want to visualize the hedging influence on the market.” The first level of thought is the option's relationship to spot — levels above or below; the next is “are we long or short it as a market maker.”
Positions by Strike (Left Panel)
Shows the net hedgeable position at each strike held by any market participant (default: Market Maker).
| Blue bars | Market makers are long |
| Yellow bars | Market makers are short |
| Dots | Position at last 10-min update & beginning of day |
| Default view | Zero-day, “Total” (calls + puts combined) |
Use “Total” — once hedged, it doesn't matter if it's a call or put. What matters is net hedgeable quantity at each strike.
Gamma Chart (Right Panel)
Models the entire SPX options position (0 to 231 DTE), not just zero-day. Displayed as a continuous simulation across strike space.
| Red lines | Local maxima of gamma |
| Blue lines | Local minima of gamma |
| Dotted lines | Inflection points (gamma flip from positive to negative) |
| Gradient shading | Intensity of gamma at each price level |
Reconciliation note (see 7.9)
This guide describes the Positions by Strike bars as blue (long) / yellow (short). The current official VS3D docs describe them as green (positive) / red (negative). Confirm which is live before relying on bar color — the scheme may have changed. The mechanics above are unaffected.
Resolved, Aug 2026: the official annotated guide confirms both descriptions are correct — bar colors follow the color scheme setting. The default palette shows green (long) / red (short); the protanopia-friendly palette (the one Dan streams on, and the one this guide's blue/yellow convention tracks) shows blue (long) / gold (short).
The Bars Are Positions, Not Gamma
Dan repeats this constantly in onboarding: “These positions are not gamma… these are actual options contract totals, net long or short, held by market makers. They create gamma.” A left panel full of short zero-day bars does not mean the market is in negative gamma: “Just make sure you understand that this does not mean that we are in negative gamma. This is gamma on the right-hand side” — the top-right panel models the whole position, and early in the day the zero-day shorts “are not enough to turn the entire complex to negative gamma… these are positions. These are not Greeks.” No panel shows per-strike Greeks: “This is not gamma by strike. This is not charm by strike. We never give you that in any panel… it becomes misleading when you start to frame this as a static thing.”
Entity Types
Market Makers (Belvedere, Optiver, IMC) — default and recommended. Broker-Dealers (JP Morgan, UBS, Credit Suisse). Firms (well-capitalized, like Jane Street). Pick one and stay with it; don't switch unless you have a specific reason.
Why There's No “Gamma by Strike” Chart
Dan deliberately left it out. A per-strike gamma bar chart is a static snapshot referenced to an unknown spot level, not live-updating, and not a simulation. Every nearby option's gamma changes when spot moves just $1 — “if you change spot by a dollar, that is a different gamma level for every option nearby.” Most platforms don't even tell you what spot level the gamma is referenced to. VS3D's approach — modeling the entire surface across spot and time — is fundamentally different. In the July 2026 onboarding sessions Dan put it this way: “When you look at gamma by strike, you're being deceived into thinking that there's some simulation going on. It's almost like taking a picture of a car driving and saying here, use that to understand how to dodge the car.”
Dan was blunter still about competing platforms in Discord (#general-chat, Apr 27 2026): “They may also be showing 'GEX by STRIKE' which is not a simulation but rather a static snapshot of 'Greeks right now' (useless, in my honest opinion)” — the same distinction the official annotated guide repeats on its dashboard page: the gradient “is a simulation across the surface, not a snapshot of greeks right now.”
There Is No One-Size-Fits-All Gamma Flip
The dotted inflection lines mark local sign changes, not a single magic level. “People ask me, where's the gamma flip? There is no one-size-fits-all gamma flip. That's an artifact of naive GEX… It's going to become very local… gamma flip, gamma flip, gamma flip, gamma flip, gamma flip. But that doesn't mean that much. You don't need to overthink that.”
Reconciliation note (see 7.9)
This “Gamma Chart (Right Panel)” is what the current official VS3D docs call the Gradient Chart (Chapter 7.7). Same underlying capability — described here from a strategy angle, and in the docs from a UI-reference angle.
The Simulation Process
When CBOE position data arrives, it takes 30–50 seconds to model. VS3D doesn't calculate a single gamma number — it runs a series of simulations at different spot-time coordinates, “modeling the option surface hundreds and hundreds of times” to produce each output. Any given point on the gamma profile represents a specific spot-time coordinate showing what the market maker would have at that time and level.
Even though the gamma profile models the entire SPX position out to 231 DTE, zero-day options dominate because of asymptotic gamma. As an option approaches expiration, its gamma becomes multiples of itself. A $50 straddle decaying to $10 creates an explosive increase in gamma that dwarfs the influence of longer-dated positions.
Key Insight
This is why VS3D defaults to showing zero-day positions on the left panel — those positions set the tone for the day's tradable range through their dominant gamma influence, even though the gamma chart incorporates everything.
Think of it in layers: there's a stable background gamma from longer-dated options, with increasingly variable and intense profiles overlaid from shorter-dated maturities. Zero-day options form the most volatile, most influential top layer.
The Expiry Hierarchy — and Its Late-Day Limit
Dan's hierarchy: “An option that has, for example, 1 hour until expiration will have so much more gamma than an option that has 1 day until expiration, which will also have so much more gamma than an option that has 1 month until expiration.” This is why “the zero-day position will become more and more of a prominent feature on the gamma gradient and on the charm profile as the day wears on” — the Greeks go asymptotic into expiration. But don't over-trade the final sharpening: once the premium is down around $10, “that gamma lives so local that it creates sharp colors at the end of the day, but it's not really a feature in the market… a local effect that might give you a momentary tradable influence.”
The 4:00 PM Shot Clock
Zero-day dominance is not just about gamma size — it's about a deadline. “The options that expire at the end of the day have a requirement. The delta has to be resolved.” “These options meet their maker at 4 p.m.… If there's a hole in your balloon, even if you inflate it, it's going to come out today.” A headline can spike vol, “but it's transient… every single day at 4:00 all these things are history and the hedge has to be gone.” That is what makes zero-day “probably the most deterministic path as far as correlation goes” — and “a great canvas to paint on, because we get a replay every single day.” Dan's own caveat: on some big Fed days “they just explode higher and stay there,” but for the most part it has to come out.
Not all zero-day exposure is created equal. In the June–July 2026 sessions Dan split it into “two different animals”: the expiring open interest — positions opened days or weeks ago that happen to expire today — and flow that is actually traded today.
Expiring Open Interest — the Tradable Part
“It's the zero-day position that is not born of zero-day trading… Things that Goldman sold me last week stick there and they expire. That's zero day today, but it's not actually zero day the way you think about it.” This inventory sits with hedgers whose systems engage the market: “You get a tradable hedging influence from the expiring open interest.” The impact on the hedging path “comes more from options that have been there for a while, that are expiring today, less from options that are trading today.”
Intraday 0DTE Flow — “A Ghost”
The firms specializing in intraday 0DTE run on turnover and inventory management: “Minimizing engagement with the market. They don't want to take delta to market and pay the bid-ask.” They “internalize as much as they can,” and customers close the same day — “this intraday profile is a ghost. It's an ephemeral thing that disappears as quickly as it comes.” The volume “is like shifting sand in the wind… until there's a real imbalance in the intraday, you don't need to pay that much attention.” Any delta “is going to be hedged today but then unwound or rolled today” — it won't create the ranges longer-term swing trades need.
Why Dan Mostly Stops at Zero Day
“I mostly stop at zero day. A lot of what I look at is zero day.” His reasoning is variance: “Let's say you're just flipping a coin on every risk factor. If you add risk factors and time to keep flipping, you just compound your variance. You have more deviation from your hypothesis the longer you go out.” Zero day removes tomorrow's unknowns entirely: “I have more certainty around what the world is right now… I don't know what Trump's going to tweet tomorrow. I don't need to know.”
Chapter 1 — Quick Reference
Bank Convention (Notional)
How much longer or shorter you get for a 1% move in the market, expressed in dollars.
Example: “1% up, market makers are getting longer $1.8 billion of delta.” Useful for multi-asset book management where you need cross-asset ratios.
Exposure (Hedge Product to Trade)
Per $1 move, how many contracts must be traded? Converts to the actual hedge product (E-mini futures).
Example: “Per dollar, market makers are getting longer 40 SPX contracts” = need to sell ~81 E-minis to get flat.
The Futures Ladder — Gamma Scalping in Action
“Imagine the market goes up $1. Market makers have the capacity to have 293 minis on that offer. If they're filled, they're delta neutral. If we go back down, they never needed them in the first place. Conversely, sell off $1, market makers could buy up to 293 futures on the bid to remain delta neutral. If we go back up, they never needed them either.” This back-and-forth — buying dips, selling rallies — is gamma scalping. The P&L from these trades offsets the theta (time decay) cost of holding the options. It's fundamentally what the options payout is all about.
What the Tooltip Number Is: S&P Units
In the July 2026 onboarding sessions Dan unpacked the tooltip figure itself: “The exposure in your tooltip is the Black-Scholes implied model gamma for the entire S&P book.” A reading of long 205 gamma “is like saying… if I was delta neutral right now, if the index went up from 7502.62 to 7503.62, I would have a position that's… long about 205 S&P units worth of delta.” And the unit? “There is no S&P. There's an S&P unit, which is the option like a combo. Think of a long call versus short put. That structure, that option unit, has fully 100 delta. Multiply it by the multiplier, you get $20,520” — the whole market-maker community “gets longer 20.5K worth of delta on a $1 move.” On why he prefers these units over bank notional: “It makes no sense why you'd go to notional when at the end you're still going to be hedging with futures contracts” — if you're trading the index locally, think “in terms of hedge product to trade.”
Critical Distinction
“Gamma is not directional. It gives you behavior.” Gamma tells you where there is support and resistance from hedging flows, but it does not tell you which way the market will move. Direction comes from charm.
Think of it like a poker table: you're sitting with big players who have their cards up and their algorithms exposed. You can see exactly where they have to provide liquidity at every price level. That's what the gamma profile gives you — the terrain map of forced hedging activity.
The very gamma hedging that provides support is the same thing that causes suppression. Positive gamma means dealers sell rallies and buy dips — this dampens movement. It's not active selling; it's absorption. “We don't have delta to sell unless we get our price.”
“It Drives Me Nuts When I See It Reported This Way”
A gamma shift does NOT mean market makers are selling a ton of futures. It means they're providing an exorbitant amount of liquidity, absorbing buying on the offer. “All they're doing is fielding the bid. It's all it is.” This is a big difference from making them a villain who is actively pushing the market down. The positive gamma effect is passive absorption — market makers are never going to start the selling process themselves through gamma alone.
Avoid “Gamma by Strike” Thinking
Static “gamma by strike” bars only show the current state. They can't predict what happens if conditions change. VS3D shows positions first, then generates the gamma profile through simulation. Learn the mechanics before trusting the visual.
From the desk — Gamma needs a trigger
Negative gamma is a force multiplier, not a force generator. Without an initiating imbalance, even a scary short-gamma regime can just churn in place. “You can just float around and it looks very much like positive gamma until all of a sudden Trump says something on Twitter and it spikes 200 bucks.” Single-factor confluence (gamma alone) is not a trade.
Symmetrical at an Instant, Asymmetric Over an Interval
“Gamma in and of itself is not good or bad. It's not right or wrong. It's not bullish or bearish really. Gamma tells you about market liquidity” — its depth. And strictly speaking it is symmetrical: “contemporaneously gamma is identical, it's symmetrical, higher or lower.” What gives it directional-like properties “at least in the immediate, is really the differential” — on any interval gamma changes, and “that change is amplified when you have juxtaposed positions.” Asked whether it's as hard to move up a dollar as down one in high gamma: “when gamma is becoming increasingly large on the way up, it's harder to move up than it is to move down, because there's an asymmetry implied. And obviously market makers are not hedging every single tick.”
The Vol-Control Pass-Through
Gamma does pick up a directional correlation on wider timeframes, and Dan traced the chain. First the containment loop: “if a lot of people are selling options, it makes implied vol go lower because we reprice the options lower. On the other side, we're also then hedging long gamma, which contains the market… You get lower realized volatility.” Then the hand-off: “when gamma is very positive and the market slows down and gets anchored, that slowing of the market produces lower realized volatility in the sample and that induces large funds that use that metric to scale up and buy more. That's the pass-through that gives some directional connection to gamma.” This is a wider-timeframe feature, not a same-day signal.
| Greek | Formula | What It Tells You | Example |
|---|---|---|---|
| Gamma | D-Delta / D-Spot | How delta changes per $1 move | 50 futures/dollar at current level |
| Speed | D-Gamma / D-Spot | How gamma changes per $1 move — reveals “call walls” | Going from 50 to 100 futures/dollar = high speed |
| Color | D-Gamma / D-Time | How gamma changes just from time passing | Zero-day options become more dominant toward close |
Speed is visible in the gamma gradient. When the shading transitions sharply from light to dark (or vice versa), that's speed. “High speed call wall” means a small further rally dramatically increases the futures dealers must sell.
Negative speed (more gamma as price drops) creates emergent support that wouldn't exist in naive gamma models. This is one of VS3D's unique insights.
Longer Gamma to the Upside
Positive speed. “That's the type of feature that makes the market slow down a little bit as you rally and have the fast spikes when you drop that tend to get absorbed and bought back up.”
Longer Gamma to the Downside
“A market that almost has like a bit of a cushion to it. Ironically, sometimes it enables the market to bounce as well, but a different character of bounce. It's more like this buys time to find the next buyer, not a programmatic sell and then retracement.”
Negative Speed to the Upside
“As we move higher, the implication is that they're no longer supporting the market or containing it as much. They actually might have to buy futures alongside the rally, forcing a move to be more violent than it might be.” And if nothing happens but time passes, “the entire process is going to be dominated by the market maker selling out of that hedge.”
Color explains why the gamma profile evolves throughout the day even if the position doesn't change. Zero-day options become asymptotically dominant toward the close, making the profile increasingly local.
Color vs Charm — Made Explicit
Color tells you how the market character changes over time (more or less volatile, more or less contained). Charm tells you how actual delta evolves (how much to buy or sell). In Dan's words: “This [color] is telling you as time passes, the way in which market makers engage with the market — whether they're supporting it, containing it — changes with the passage of time. This [charm] is telling you as time passes, market makers have to buy or sell. Here's how much.” Color = potential volatility shift. Charm = directional bias.
Reading the Gradient: Vertical Is Speed, Horizontal Is Color
Dan's axis map for the gradient chart: “up and down is speed” — D-Gamma/D-Spot — and “if you scroll across and think about how gamma's changing over time, that's actually called color.” On the shading itself: “as you're moving from an area that's kind of grayish or dark to a more dense bright green to the upside, that's a positive speed market. The more dense and colorful the green is on your gradient, that's more positive gamma. Eventually it flips red — these dotted lines are flips — that will be actual negative gamma.” One more read: when gamma is “persistent across the range” it's not zero-day — “not a lot of speed. Usually, especially if you see that in the morning, that's a reflection of longer tenor positioning.”
There Is No Single “Gamma Flip”
For traders arriving with the original spot-gamma concepts, Dan pushed back in the June and July 2026 sessions: “they think there's a big gamma flip… gamma flip's all over the place. Reality is, locally, gamma's gonna flip all the time… the change in gamma with respect to passage of time is called color, actually. Where the color flips, that's a gamma flip again. So there's a lot of gamma flips in real life.” A rarer color warning: “sometimes you will have days where the overall profile looks like it's positive gamma and all of a sudden you have this big feature creeping into the frame where a lot of zero day positions clustering at the end are held the opposite way as most positions… suddenly the market can rip away from an area that looks stable.” Less common, but those positions gain gamma into expiration.
How the Greeks Evolve Into Each Other
Dan's mental model from reading the grid every day: “bucketing things, normalizing them, thinking about how vega becomes gamma and how vanna becomes speed and how vanna, vol down, becomes charm and how does it all evolve, takes time to understand but it helps you understand a cause and effect.” He frames the hierarchy as cause and effect, not a static table.
Dan's recommended settings for a “normal” gamma environment:
| Setting | Recommendation | Rationale |
|---|---|---|
| Range | Manual, ~250 min/max around zero | Anchored to ~10 billion notional gamma as “normal” |
| Symmetry | Always keep symmetrical | Breaking symmetry distorts the zero line representation |
| Opacity | Higher for gamma | Gamma should be visible and intuitive at a glance |
| Intensity/Power | Around 1 | Exponents near 1 feel most natural |
Practical Tip
When gamma exposure is 25 or less on your profile, it should be nearly invisible. You want an intuitive feeling that the market is “loose” when gamma is thin. Don't get carried away when dotted lines touch price bars — that's just coincidence, not precision.
Opacity & Visual Preferences
Dan typically uses ~35% opacity for the gamma overlay. The goal is to know “at the corner of my eye and doing something on the other screen” whether there's gamma to trade, and where it's going to show up — without it dominating the chart.
The “Cartoon Setting” Warning
Setting the power law to minimum teases out the boundary and “really shows the edges,” but Dan cautions: “there is no such thing as this degree of barrier.” The model represents a general level with a huge number of participants underneath the surface. The exact boundary is unknowable. “I don't like to get you guys confused down paths that have no real meaning to them.”
When to Change the ±250 Default Range
Use trailing percentile averages to calibrate. If the trailing average gamma exposure is around 20 billion notional, consider switching to ~500 around zero to avoid the chart being saturated green. For reference: in 2017, it was common to see 1,000 futures on the bid/ask per tick with ~30 billion gamma — the default ±250 would tell you nothing because it would just be “deep green all the time.”
Light Gamma (<100)
Market has reduced hedging cushion. Moves are easier to achieve. Exercise caution with directional conviction.
Virtually Negative (<25)
“As good as negative gamma.” The market character is loose; same selling creates much greater price distance.
True Negative (Rare)
Sustained negative gamma occurs maybe 10% of the time or less. When present, dealers are chasing moves, amplifying them.
Even the absence of gamma acts like negative gamma because it's all relative. If you're used to 10 billion of gamma and suddenly there's 1 billion, that's a major shift in market character.
Near the close, gamma becomes asymptotically large on zero-day options. Exposures get “stupid” — don't overinterpret $55 billion gamma readings. That's just a modeling artifact of micro-resolution near expiration.
The Flip Side: Low Vol Makes Gamma Dense — and Longer-Dated
In the July 2026 sessions Dan put a number on the opposite regime: “all this stuff is what contributes to a more dense, long gamma profile once you start getting VIX under, like, 16.” The mechanism: “When [vol] gets really, really low, options have a lot more gamma and longer-term options distribute that gamma farther out than options that expire today… Those positions don't just distribute their influence $10 or $20. It's 100, 200 point ranges that are very, very stable.” When vol drops, what appears in the profile is largely longer-dated strikes gaining gamma — “7660 calls on July 23rd, that's actually going to have gamma now. And the lower vol goes, as long as it's still within range, it's going to have a lot more gamma.” His framing: “I think of longer term gamma as creating market regime” — “gamma is a little more regime defining,” in contrast to charm, which the zero-day position dominates.
Gamma Is Not Positions — Check the Delta
“Remember, gamma is not positions. Position is not gamma. When you're looking here at 7620, for example, on the zero day expiration, this will have no gamma in our profile right now… because it's not local enough. This option doesn't actually have any Greeks against the spot reference.” Dan's fast filter for whether a strike still carries tradable hedge pressure: “just go check your delta. The 7430 puts and the 7425 puts, they all have deltas 10 or less… Small delta means the hedge is already gone.” The exception is settlement: “These positions are not gamma, but they become a bigger force in gamma when you think about the settlement process… an option with like a few minutes expiration has a ton of gamma, and so you can't escape its force if you're around it at the end. It's temporary. It'll expire and then the market will be free to do its thing again.”
For Futures Traders
Gamma defines boundaries for your directional trades. If you're long futures in an area with positive gamma above, you get wider take-profit targets because you know selling resistance exists there. Below in thin gamma, use tighter stops.
The same amount of selling creates greater distance in low-gamma areas. If 500 futures gets you $2 of movement in positive gamma, it might get $6 in a gamma void. This changes your entry, exit, and take-profit calibration.
Peak Gamma Is an Exit Target, Not a Runway
“When you see these big gamma gradients, the first thing you should do as a futures trader or directional trader is know that you shouldn't be looking for much more distance than these gamma peaks. Your risk-reward changes dramatically.” Into dense positive gamma “you would expect that the market should slow down. No matter what your reason for the trade… this would be a great target to exit if you're right on a long.” Dan walked a live exposure ladder to make it concrete:
| Level | Exposure | What It Means |
|---|---|---|
| 7475 | 36–37 | “For every dollar they have 70 [minis] to sell” — take 200 minis to market and “you might get $3” of movement |
| 7500 | “Approaching 10 billion or more” | “Enough to overtake all the negative gamma… that comes out of the leverage ETF complex that people love to write about today” |
| 7525–7530 | “It's going to double” | Take 200 minis to market here and “you will not see a quarter tick” |
Think “distance traveled per unit of force”: the same order buys less and less distance as you rally into the wall, so the price line flattens into peak gamma.
In Positive Gamma Environments
Use spreads, flies, condors — structures that benefit from containment. The market is likely to stick in a range, so collect decay.
In Negative / Absent Gamma
Use single-leg options for convexity. If you expect the market to run, don't cap your upside with a short strike. Let the trade work in the void.
Where the Gentle Uptrend Comes From: The Overwrite
Positive gamma sitting above spot “is often produced when there's a lot of calls that are sold to market makers that exist above spot levels. The normal overwrite sequence sells calls above spot and produces this thing where the buyback of the hedge combined with the extra, extra, extra gamma on the profile just sticks you in this gentle trend upward.” The character to expect: “when you're long, you're not expecting blowoff top movement. You're expecting a slow grinding, shallow dips and returning back to the trend type of behavior. This has been the case for a lot of the July period. It often is.”
Gamma Hedging Mechanics — Long gamma (left): dealers sell rallies / buy dips, dampening price (pin). Short gamma (right): dealers buy rallies / sell dips, chasing and amplifying the move.
What Long Gamma Gives You
V-shaped dips are a gamma feature: “when you sometimes see the market dip quickly and then rebound as fast as it went down, a lot of what's happening there is option repricing, and a lot of what saves the market from falling farther is actual gamma on the profile.” The signature: rallies grind because “the absorption provided by long gamma flattens out the curve,” while “oftentimes you'll see sell-offs that happen like this: oh, the vol spike — and it's gone.”
What It Doesn't Guarantee
Heavy one-way flow can eat through it: “This reminds me of July 24th, 2024, the massive positive gamma… but we're still just chewing through it, like a Pac-Man game.” And not every long-gamma regime grinds up: “A positive gamma regime could be one of two things. You can have a positive gamma position that has positive gamma centered below it… that's the position that we mostly had in January and February… if you rally you lose gamma and if time passes you lose gamma.” Does positive gamma always mean grind up? “Not necessarily.”
The VS3D dashboard offers both model and simulated versions of gamma and charm. Understanding the difference helps you interpret the data correctly.
Model Greeks (Black-Scholes Output)
The instantaneous Black-Scholes model output for the entire position. Gamma is the model's derivative of delta with respect to spot. Charm is the model's derivative of delta with respect to time.
Limitation: Can produce misleading readings on complex positions. For example, an iron condor might show negative gamma at one strike and positive gamma $5 away — the model shows both, but over a realistic trading range they cancel out.
Simulated Greeks (Finite Difference)
Simulated gamma: Simulate a $5 index move, measure the actual delta change, divide by the distance moved. This produces an “effective gamma” that normalizes distortions from complex structures.
Simulated charm: Advance the clock (e.g., 5 minutes), sample the delta at the new time, and compute the change. This captures the actual delta evolution over the interval instead of the model's instantaneous projection.
When Simulated Greeks Matter Most
On days with complex or “fishbone” positions — where model gamma alternates positive and negative across a narrow range — simulated Greeks provide a more realistic picture of what the hedging flow will actually look like over a tradable price range. “It's a gamma that controls for tiny little moves or distortions that are going to be more obvious to you sometimes when we have weird looking positions.”
What the Gradient Simulation Actually Runs
“This is the entire position held by market makers in the SPX. Everything including flex. This position is then simulated for every spot change and time change, every step… What is the gamma if we're here at this time? What is the gamma if we sell off to here at this time?” It mirrors how desks think: “If they're hedging every $5, for example, what we do is we run interval simulations… this is how we think as market makers. Let's advance the clock half an hour and imagine we step down $5 and we raise [vol]. What's our new delta? So our vol path takes it into account.”
Snapshot Artifact: The At-the-Money Gamma Cone
“You're going to wind up seeing artifacts where the only options that have gamma, for example, on the zero day profile are going to be near the money. So you'll have this big cone of options that look like they have a lot of gamma at the money and it'll move around with spot.” You'd think something is going on, but you're just watching the model output change as spot moves.
Chapter 2 — Quick Reference
Definition
Charm (D-Delta / D-Time) measures how much longer or shorter market makers get every 5 minutes purely from the passage of time. It's converted to E-mini equivalents for actionability.
When charm before 2018 was never discussed publicly because options didn't expire every single day. With daily expirations, charm has become a dominant force — an option expiring today sees its entire delta disappear today, creating massive passive hedging flow.
Dan's One-Line Definitions (Discord)
Two of Dan's own compressed statements of the same definition, both preserved in the official annotated guide. On what the number is (#general-chat, Jun 18 2026): “A positive Charm exposure indicates the Black Scholes implied delta change over the following 5-minute period. The model by default expresses this in 'units of the underlying'.” And on what it means (#general-chat, May 7 2026): “Charm exposure is a directional bias >> 'over the subsequent 5 minute period, dealers will have [hedge product to trade] futures to buy/sell'.” Positive exposure = market-maker selling pressure over the next interval; negative = buying pressure.
Anchor Yourself: Fast-Forward to Expiry
Decaying options “don't just lose premium, they lose delta.” Dan's advice for never getting charm direction backwards: “Just walk through a simple example of hedging an out of the money option or in the money option and fast forwarding to expiration. That's my best advice for what to do to make sure you anchor correctly.” It helps to go to the extremes — imagine expiring the option and closing the hedge: “When I close the hedge, do I buy or do I sell futures?” Look at the panel as though you're the hedger: “Fast forward the clock and decay everything to zero, the options disappear. And what you're left with is nothing but the other category, the futures.” The principle underneath all of it: “Position creates the Greek.”
Key Distinction
Gamma tells you behavior (where the market finds support and resistance). Charm tells you direction — a real, passive, biased flow that occurs as options decay. If no other imbalance enters the market, the charm cohort drives the process forward.
Charm produces a flow that looks like a TWAP (time-weighted algorithmic program) — steady, passive selling or buying throughout the day. From experience, when you put flow out like that, it tends to get picked up on and seemingly moved against by other participants, often amplifying the effect.
The charm influence comes from the fact that once an option is hedged, the delta must eventually return to zero (if OTM) or 100 (if ITM) by expiration. The futures hedging that process creates a one-directional bias.
Above or Below the Money — That's All It Is
Forget the quadrant framings. “A lot of people think about charm on some kind of quadrant basis, and they'll talk about extrinsic versus intrinsic or moneyness and call or put. I would encourage you guys to think about charm more conceptually as whether the option is above the money or below the money. It's really all there is to it” — plus the second axis: whether the dealer is long or short the option. The direction rule that falls out: “charm pressure pushes away from clusters of shorts on the dealer book and pulls towards clusters of longs.” And “charm is going to flip when you traverse these big dealer shorts. These create inflections” — “if we lose one of the strikes then suddenly you start to see the influence of charm coming from a different set of options.”
Dan's worked example — one strike above the money, three dealer positions:
| Dealer Position | Path Into Expiry | Charm Flow |
|---|---|---|
| Long 20-delta call (100-lot SPX) | “You hedge that call by selling futures… you're going to sell 40 ES minis. If you expire that option out of the money, you have to buy back all those futures.” | Bullish — the buying back “nudges the market sometimes towards that strike” |
| Long 80-delta put, same strike (still above the money) | “An 80 delta put when you fast forward to expiry is a 100 delta put. So instead of buying back the hedge, you're actually buying to complete the hedge.” The last 20 delta = another 40 minis. | “The exact same path” — “put call parity holds, the option has the same dynamic influence” |
| Short upside calls (red position bars) | “You sold calls and bought futures against them, and as they expire out of the money, you have to sell those futures out.” | “It produced the exact opposite” — bearish |
From the desk — Water carving a canyon
Dan described charm as a “tilt” rather than an impulse: “Small passive repetitive flow is much more determinant sometimes than big splashy one-off flow. I don't know why that is. I have never figured that out.” James's analogy: “Think of water carving a canyon.” When charm is uniformly directional across the in-range profile (all yellow / all bullish), that's far more tradable than alternating bullish-bearish-bullish signals.
The “Weighted Coin” Framing
Charm is NOT deterministic. Think of it more like a weighted coin — on balance, if there's no strong imbalance among other flows, that's enough for charm to have a say in direction. But once you see active selling (e.g., short downside gamma combined with heavy institutional selling), charm can be completely overridden. “It's not saying that it has to be the only flow in town. More realistic is there's no strong imbalance among the other flows, and that's enough for charm to have a say in the direction.”
Charm (D-Delta / D-Time)
One-way ticket. Time only decreases. The shot clock runs out, options expire, delta must resolve. Highly predictable in direction, accelerates toward the close.
Best for: afternoon trading, low-vol environments, non-event days.
Vanna (D-Delta / D-Vol)
Two-way. Volatility can increase or decrease. A vol drop acts like time passing for the model, but vol can also spike, reversing the process.
Best for: post-spike persistent vol drops. Less predictable; more active at open.
Time and volatility are the same thing to the model. Increasing time (which we can't do) is like increasing volatility. Taking vol to zero takes the option to zero, just like taking time to zero. The key difference: you can't reverse time, but vol can go either way.
Think Distribution — and Watch the Reach
Dan's mental model: “The mechanism is the same. Just think about the distribution.” Pass time or drop vol and the curve shrinks — wing deltas disappear or go fully in the money. “When you increase vol, it's like you're widening out the distribution. You're adding delta to the wings, taking it away from the at-the-money.” The reach differs, though. Charm is “really heavily weighted towards the options that are expiring the soonest,” while a vol move hits the whole surface: “You see a VIX spike from 16 to 18, you're going to see a big repricing of options one month out… and big positions across many expirations.” Speed differs too: “when you have a big vol change, everything reprices instantly, instantly… the charm path is like this passive thing that happens over time. But a big vol change is like, nope, right now your dollars are different, so you better hedge it.”
Dan coined this term to describe how dealer hedging transfers selling (or buying) across time:
How It Works
Imagine a 25-delta put. Price drops, it becomes 30 delta — the market maker must buy 10 more futures. Time passes, the option decays back to 25 delta — sell those futures back out. The market maker didn't represent real end-user demand; they provided liquidity with a shot clock on it. Those futures will be sold back, creating a predictable passive selling flow.
This is the core mechanism that makes charm tradable. Every hedge adjustment on a zero-day option has a known expiration time, so the directional bias from these hedges is predictable and persistent.
In the Money by Two Dimensions
An option “can be made more in the money by two dimensions, spot or time.” A short 55-delta call with spot going nowhere: “at the end of the day, that's not going to be a 55 delta call, even if you haven't moved at all in spot… 55 becomes 60 becomes 70. And then it gets fast. 70 becomes 75 to 85… The clock ticking forces you to buy more futures.” The completion is gradual — “you can be 100 points through some of these, and they still have only 70 delta. But as time passes, you complete the hedge” — and it is total: even an option “$1 out of the money” eventually needs the entire hedge unwound. Once through the strike, “it's not going to decay back to zero delta. It's going to decay up to 100.” That juxtaposition — OTM deltas resolving to 0 while ITM deltas resolve to 100 — is “the nexus of what creates the stickiness, the pinning mechanism at expiration.”
Dan's 4pm arithmetic from a July 2026 session — both legs force buying, “a problem you can't really solve”:
| Position | Delta Now | Delta at 4:00pm | Forced Flow |
|---|---|---|---|
| Long 7580 calls | 20 | 0 | Buy back the entire short-futures hedge |
| Short 7565 calls | 55 | 100 | “Buy an additional 45 delta… You just have to buy your futures.” |
Use the Straddle Bounds as a Charm Lens
On Positions by Strike, “just outside of the dotted line is where charm will be maximal for options in this series, meaning the zero day contract… It's only true for the expiration you're looking at.” Watching the lines narrow tells you what comes next: “as these lines narrow as a straddle decays, how will charm change.” Collapse them forward to find the pin: “if you start collapsing this line… shrinking it symmetrically, you'll start to see that charm will actually kind of neutralize at some point… because we're actually already on the pin target” — on that day 7425 would read zero charm, “the inflection between suppressive above and supportive below.” Between two long strikes, the bigger side wins: trading between 7500 and 7515 late in the day meant “a net charm down… because this is net bigger on the top side,” with the pin “implied to be a touch above 7500” once the straddle was $5.
Why the Drift Is Always There
The baseline charm bias comes from what the market structurally is: “long equity under the hood,” with “put spread collars, these types of buffer products” and clients “selling calls against their exposure to finance the hedge.” In Dan's words: “People own equities, they buy puts, and they sell calls. That's like a sale of equities with a shot clock on it. As the options decay, that creates a little bit of a bias in the actual hedge flow” — “something like a drift… that time-based drift, which is like a broader charm feature across time.”
- High vol uncertainty
- Heavy external flow
- AVOID charm signals
- Flow settles
- Straddle begins decaying
- Charm building
- Low external flow
- Charm accelerating
- BEST charm signal
- Gamma asymptotic
- Very local behavior
- Pin resolution
Intraday Charm Timeline — The 1:30pm–3pm window is the charm sweet spot when institutional flows are lowest
Refined Windows from the June 2026 Sessions
In the June 2026 Q&A sessions Dan gave the midday window as 11:30am–2pm: “The best time I find is often like this middle of the day… like after London close… People go to lunch until 2 p.m.… in that window, let's call it 1130 to 2, you can get very, very actionable moves that align very cleanly with the charm profile.” The open stays off-limits for a mechanical reason: “It's not strong yet. It shouldn't be strong yet. Charm is not strong at the open… And also it's a busy time.” The close earns a second window when vol is low: “If options had a linear decay profile all the way to close, I would not trade the close. But they expire and that's when Delta erodes the fastest” — and with “lower vol, lower VIX, I like this stuff even more at the close… the pinning influence is massive and you're also kind of alone.” Event freezes shift the map entirely: with FOMC, “so much of the charm would have to happen at the end of the day… because FOMC is going to flatline… you get this big charm related influence at that time.”
Dampen Early, Respect Late — the Exposure Is Honest Either Way
Dan's standing rule for weighting charm through the day (#general-chat, May 6 2026): “I use the Charm paths throughout the day but in the earlier part of the day I am dampening my reliance on them intentionally — the exposure values are what they are — given the same position, there should always be increasing strength in the charm flows as we near expiration.” The model isn't wrong in the morning; the flow is simply small relative to everything else trading. The same position produces stronger charm flows as expiration approaches, which is why the bands intensify across the afternoon. Early in the day, discount the paths; late in the day, respect them.
Best Environments for Charm
Low-vol days (VIX 12-15), boring Fridays, summer doldrums, holidays, Thanksgiving week. The bigger the position, the stronger the flow. Non-event days with low external participation.
Worst Environments for Charm
High macro event days, straddle repricing days (vol increasing), high vol-of-vol periods. When the straddle ticks up, charm is not the dominant force — other flows are overpowering it.
Which Options Carry the Charm — and How Much Is Enough
The delta band: “Charm as a very basic rule of thumb will be maximally influential when an option has about 15 to 25 delta. The skew options are most important, that like one standard deviation point.” And note the center of the profile contributes nothing: “The at-the-money option doesn't charm. But the 20 delta does. The 25 delta starts to. The 15 delta does.” The exposure level: “I usually think of charm as being important or influential when we start to see it higher than 20 exposure levels early in the day. Certainly later in the day it should just grow anyways, but you want to see bigger exposures and more persistent range of exposure.” An exposure of “five, six, very small — you don't want to overcommit to a bias in trend because of this.” Low-volume days help too: “it tells me that maybe the charm profile is more actionable.”
Why the 1:30–3pm Window Works — Two Reasons Combined
The equity/index volume profile is U-shaped: heavy at the open, heavy at the close, light in the middle. At the open, plenty of external flow competes with charm — even if charm is strong, there's no great trade. In the 1:30–3pm window: (1) the close-of-day flow hasn't arrived yet and volumes are still light (“people actually do go to lunch and the market just dies”), and (2) options decay faster as time runs out, meaning greater charm influence per unit of time. Both reasons combine to make this the optimal window.
Charm Is an “At-Risk” Influence
Bullish charm often comes from structures as simple as “you sold puts and sold futures.” The buying back of futures against short puts creates passive drift up. But it's an at-risk influence — the puts don't go away, so there's still a gamma problem if someone comes in to sell aggressively. Market makers are still short downside gamma from those puts, so active selling forces them to sell too. Always remember: charm is “more like a weighted coin” — it requires the absence of strong competing flows to have a say.
Charm has a short shelf life. Dan's tenor breakdown from the July 2026 sessions:
| Tenor | Charm Relevance |
|---|---|
| Zero-day | “Very very relevant” — “if you have Charm today, it has to expire… it has to happen” |
| 1 day out | “The same delta option has less charm” |
| 7 days out | “Still might not be enough to move any kind of hedge off the market maker's books” |
| 30 days out | A 20-delta option decays “a fraction of a delta every day” — “it's not about decay yet. It's not. It's about volatility.” |
A week or a month out, charm is “virtually nothing compared to what it would be if it were a zero day option” — and vol can undo it entirely: “if vol spikes and a week passes, it can actually be higher than it was before. The opposite of charm.” That certainty is why Dan favors zero-day charm: “I'm chopping out all these conditionals.”
North Star: The Market-Open Charm Gradient
When intraday charm keeps flipping between bullish and bearish, Dan anchors to the snapshot: “I anchor to what charm is at the market open, meaning what the charm gradient looks like for the day as of the market open. I'm kind of using that as my guide… like your North Star compass.” The open position “is like a sticky thing… the reason it changes for the most part is because of customers trading… there are many days where I just use the morning profile and that has served me pretty well.” His handling of the flips: “there's a stable foundational position and then the intraday stuff will be noisy. It just will be… anticipate some reversion back towards the morning profile.” And the payoff claim: “the charm profile at the start of the day has more bearing on ultimate path correlation.”
The Snake Oil Warning
“If I was into snake oil, I would pump this on Twitter… look how important charm is, we've been selling off all day. But the straddle actually ticked up — how can charm have caused the sell-off?” The straddle must be decaying for charm to be the dominant force. Always cross-check.
Gamma can absorb charm. Even if charm shows 400 futures of selling pressure, if there are dealer-long options above that can absorb 1,400+ futures through gamma hedging, the charm flow gets swallowed. The profile “consumes itself.”
Short options create charm but also create negative gamma. A position with short upside calls and long downside puts shows downside charm. But if the market rallies through the short calls into negative gamma territory, dealers start buying futures (chasing), which can eviscerate the charm signal completely.
Trading Tip
Don't think binary (“charm says down, so we go down”). Think probabilistically: “Charm shows a bias. The risk is a rally through the gamma barrier. So I'll use put spreads instead of naked puts to reduce convexity risk if I'm wrong.”
A Changing of the Odds
Dan's payoff-shape framing (his illustrative numbers): “There's a 70% chance we're gonna get selling in this range… But there's also a 30% chance that we're gonna get buying from some outside source, and that buying is gonna meet negative gamma and be amplified. So it's like a changing of the odds” — “a better chance of landing in this narrow range. But also… a smaller chance of a more violent move away.” A live cross-check: “when vol is going up, think of that as an active flow. Think of that as a contradiction to the passive… vol down mechanics and to oftentimes charm.” And when supportive charm is the only thing holding the tape up — “we've been in supportive charm all day but we can't seem to crack anything… that buying back of futures might be keeping this limp, wet blanket market grinding along. What is the real interest? What comes next?” — Dan's answer: “I just want to let the market show its hand.”
Never Use the AM Expiration for the PM Pin
“I would never, ever, ever, ever use the AM position to determine that day's PM pin.” Normally there's no conflict — “usually we have no AM position. We have PM expirations and then we have the AM on the Friday” — but when an AM expiration lands on the same day (as when a Friday AM was moved up to Thursday), keep it out of your pin analysis for the PM session.
Final-Minutes Charm Is a Lean, Not a Certainty
A caveat carried in the official annotated guide's charm page: in the last minutes of the session the printed charm quantities can get very large right as closing auctions and vol flows dominate the tape. The number is honest — the position really does have that much delta to resolve — but it is competing with the day's heaviest external flow. Read late-day charm as a lean on the tape, not a promise about the last print.
Vanna becomes significantly more complex—and more powerful—when VIX is elevated. Day 5 of the onboarding covered this in detail through a live CPI day example.
The Vanna Engine: The Vanilla Risk Reversal
“Not every option has Vanna. It usually comes from what we call skew. So 20 delta on either side is kind of like peak Vanna.” The persistent source: “the general hedge, where we call it a vanilla risk reversal. Customer owns stock, they buy put, and sell call to finance the hedge.” The dealer takes the other side — “short put as a market maker and long call, short downside, long upside, which is kind of normal” — and “both sides of this trade, even though we're long one option, short one option, they have the same hedge.” Spot sits between the two clusters. When vol drops, “the options become less of an option and their deltas drop on both sides” — a “20 delta put will have no delta if vol goes to zero” — forcing dealers to buy back the futures hedge. “It's that transmission that's the important thing.” The general rule: “Vanna produces a need to hedge directionally… If you own a lot of upside options, and volatility is declining, that's gonna encourage buying and pushing towards the market… Conversely, if volatility is increasing… forcing selling in the Market Maker book, and pushing away from that.”
When a Rally Morphs the Position: The Natural Upside Boundary
The risk-reversal engine wears out as you rally into it: “the short put options… are no longer 20 delta, they're going to be smaller, maybe 5 delta” and once the calls get “inside of 35 to 50 delta, they're more like straddles, less like wings, or skew… spot vol correlation starts to degrade… You'll start to see skew drop.” And straddles do nothing: “When you're long straddles, they're actually pretty boring options… it's just long gamma. It's long vega, and you're paying theta… That's the area where you start to see the market signal that maybe the rally's run its course. Doesn't always mean we turn there.” Dan reads this as a ceiling: “If we go up any more, they start to lose Vega in the profile and spot vol correlation flips. I think about that as a natural upside boundary in the position. You can't drop V and make market go higher.” The dashboard shows a spot-vol correlation inversion level, but note it uses all positioning — Dan weights “the positioning I care about most, which is 1 month to 3 month.”
Volga (Volatility Gamma)
Volga is the gamma of VIX options—how much delta market makers gain or lose per move in VIX itself. When there's a lot of volga and a lot of Vanna in the S&P, the VIX gamma effectively converts into S&P gamma. This is a secondary path to gamma that doesn't come from the underlying options directly.
The VIX Complex: The Transmission Is Vanna
“The VIX has its own underlying and its underlying is technically not the VIX future, it's technically the strip of options in the SPX” — all connected through arbitrage. So VIX positioning feeds straight back into the S&P: “VIX hedging, the transmission is Vanna… if the VIX positions are such that dealers are short a lot of calls and the market's rallying and they're accelerating the move through the VIX complex, that's just going to make volatility move faster in the underlying, in the S&P.” The VIX also has its own gamma problem: “if there's a lot of negative gamma in the VIX, and market makers have to buy and sell a lot of options, or Vega, or VIX futures to manage it. That creates a back-and-forth type of erratic behavior, almost like we see in the SPX when we have negative index gamma.” VIX positions can even carry their own time force: “a force that requires market makers in that product to just buy futures or sell futures, kind of like charm, as time passes… irrespective of whether the market is selling them or buying them options.”
The High-Vol Paradox
“When vol's high, you reduce gamma in the options but you have more vol-of-vol which can create gamma by way of Vanna—just a different path.” Higher implied vol flattens traditional gamma (wider distributions), but the increased VIX sensitivity creates a secondary source of delta hedging flow through the Vanna channel.
The 1% Vol Shift Metric
VS3D provides a Vanna metric showing futures required per 1% vol shift. Example from Day 5: “If vol goes up 1%, market makers have 6,700 futures to sell. Flip it: if vol goes down 1%, they have that many to buy.” These are large flows that can create significant price impact, especially when VIX moves multiple percent in a session.
Why this matters for erratic price action: When VIX is elevated and there are big Vanna positions, VIX moves create rapid delta changes. VIX spikes = sell futures; VIX drops = buy futures. If VIX oscillates, you get erratic realized volatility—the zigzag price action isn't random, it's the mechanical result of Vanna hedging reacting to vol-of-vol.
The Vol Base Rate — and the Post-Spike Train
Vanna needs a vol view, and Dan's base rate is simple: “Mostly they trend, they drift lower a little bit, we get spikes and then it's just a decline” — “when you have a big vol spike, it's gonna probably come off.” That makes post-spike moments the highest-conviction vanna setups: “like in August of 2024… vol spiked so much you knew it was going to come down because it was an artifact of a technical glitch in the market effectively. Knowing what the Vanna profile was like in that moment, super powerful, because you know the strength of the move back is really, really strong.” Follow the flow rather than fight it: “It's very hard to step in front of those trains because it's not a small amount of futures, it's thousands at a time… it becomes cyclical, like a feedback loop sometimes, which makes it good to follow too.”
Two Vol Paths That Change the Playbook
(1) Vol pinned at a floor while price sits near the profile's biggest vanna: “If we get mechanical suppression of vol to come off while we're still in this range near the highest vanna in the profile, then it's a really good look for a snapback that can be pretty violent.” (2) A VIX position built for a grind higher: “Is it one of those positions where we might get stuck in a grind up in vol no matter what's happening in the index? Well, that tells me sustained sell-off, not a dip that you buy right away, because of that continuous feedback loop with vanna.” The trap regime is rare but real: “It's rare that vol gets trapped in a normalizing upward process. In March quarterly, we did get knocked into a feedback loop that was very much like spot down, vol up.”
Tracking Vanna Influence
You don't need to model the full vol surface. Dan suggests tracking one-month skew on a percentile basis as a proxy. If one-month skew looks high on a percentile basis, you can infer what's compelled in the futures hedge from Vanna. The vol surface does not move in parallel—“you would live your whole life before you saw a parallel vol shift across the entire surface”—so the Vanna calculation requires nuance, but directional signals are still valuable.
Confirming a Vanna Read — Dan's Workflow
First, for vanna flips, restrict the participant filter: “I've had great success using the market maker position only for identifying really important vanna flips” — it's how Dan has “gotten the spot up, vol up right almost every single time, sometimes down to the day. And that all comes from here.” Second, ask “does a vol move have traction?” — confirm high vanna with one-month skew and check that “it's actually high in the right spot, where Vol is most active, in the VIX-related contracts” (“Matt might watch three month more than one month. I watch one month for the Vanna transmission”). Third, remember the read is not always directional: “Sometimes it's going to be neutral… there are times when it's technically inverted.” And “one step farther, you look at VIX positions, that really helps to kind of correlate and predict moves.”
Key limitation: Unlike charm (one-way—time only passes), Vanna flows depend on vol direction, which is uncertain. This makes Vanna harder to trade with conviction. In low VIX environments (14-16), Vanna matters less because vol-of-vol is low and there isn't much room for VIX to decline further. In high VIX environments (20+), Vanna can dominate charm, creating complexity but also opportunity if you read the vol direction correctly.
Swing Trades Are Vanna
“Swing trades are a bit more complicated and they're not well understood, how to find the information for these in this data. If you've ever watched commentary from the other GEX providers, it's not like it's well understood. But it's Vanna, okay? And so for me, I look at the Vanna profile.” On longer tenors decay is too slow to matter, but vol is not: “You take 1% out of the implied vol of an option, at 20 delta, 30 days out, it will actually have an influence. And these positions sometimes cluster… that is a stronger realm for longer dated positions than charm.” Dan now rates this work above the gamma equivalent: “even more important than deconstructing the gamma gradient is deconstructing the Vanna gradient… breaking this down by cycle is actually much more useful than breaking down gamma by cycle.” Regime note: “If you go back to like 2024, vol was pretty complacent… you didn't have to worry about Vanna so much. Now you do. Vanna is a more important driver.”
Chapter 3 — Quick Reference
Everything reduces to one fundamental question: Is the market maker long or short the option? The dynamics cascade from there.
Key Principle
Put equals Call. Once hedged, the same-strike call and put produce identical market influence. What matters is proximity to spot and whether the dealer is long or short. When Dan says “call,” he means option above spot. When he says “put,” he means option below spot. The reason is put-call parity: “once the position is hedged by a market maker… it is the same whether it's a put or a call, because we care about the dynamic influence.” Dan's test: “imagine buying or selling a call of 70 delta or a put of 30 delta with the right hedge. And then imagine a future movement… it's exact same.”
Long Option (Dealer Bought It)
Gamma: Positive — slows market as it approaches the strike (sells rallies, buys dips)
Charm: Magnetic — passive buying/selling decays delta, pulling price toward strike
Net Effect: ANCHOR — Attracts & pins price, especially late day
Analogy: Two magnets attracting each other
Short Option (Dealer Sold It)
Gamma: Negative — accelerates the market as price approaches the strike (buys rallies, sells dips — chasing the move in either direction)
Charm: Repelling — delta decay pushes price away from strike
Net Effect: TEST — Repels price, marks range boundaries
Analogy: Two magnets of the same pole — can never stick together
From the desk — Short positions repel, long positions pin
“We trend away from the biggest, most spicy-looking positions mechanically… like magnetism towards the longs.” Every direction pushes price away from short strikes. Every direction pulls price toward long strikes. It's not a metaphor — it's the direct consequence of how delta hedging works at each strike.
The Hedge Already Happened
“By the time you see this position on your gradient, on your dashboard… the futures for sale is gone. So you've already, without seeing it, saw it. The sale has happened.” When a customer buys a put, the dealer's initial futures sale is in the market before the position ever shows up on the panel. Remember who does what: “it's customers that are the movers, dealers are the hedgers,” and market-maker-to-market-maker trades “just disappear into a wash on this profile.”
That gives you two reads in one panel. “The other side of this market maker book is generally customer book” — the dealer side prescribes the hedging influence, and the customer side reveals the market's interest: “if there's a lot of customer imbalance… you see everyone and their mom is looking for a rally today.”
The Default Position: Dealer Short Risk Reversal
“The regime that grinds up is positive gamma mostly above spot.” Equity holders need a hedge: “they buy puts so they don't need to actually derisk their portfolios, and then they sell calls to finance that… That's the dealer short risk reversal. That's the foundation of why there is skew in the index. Why puts cost more than calls? Because people buy them more than calls.” Dan calls it the safe default — “it's not always going to be there, but it is there a lot.” The JPMorgan collar is the textbook case: “a microcosm of the entire market structure” — the bought put “places that big bar down here,” the sold call pays for it, and the VS3D position reads “long upside, short downside” with the gradient “deep green up here, fading away to black to red down here.”
When a market maker is long an option (customer sold it to them):
As price approaches the strike: Positive gamma increases, requiring additional futures selling (for calls above) or buying (for puts below). This creates a stopping force — resistance as other participants push toward the strike.
As time passes below the strike: Delta decays (charm), requiring the market maker to buy back the futures hedge. This creates a gentle, passive lift toward the strike. It's not a strong force, but it's persistent.
The combination creates pinning. Gamma slows the approach while charm provides a drift toward the strike. If price gets stuck near a long-option cluster, the seesaw of gamma and charm creates a magnetic effect that intensifies toward the close. Dan describes this as “temporally redistributing the flows”—gamma sells into buying pressure (absorbing it), then charm produces a buyback effect as the option decays. The net result channels price and creates a buoyancy that encourages price back toward the long-option cluster.
The Pinning Process
If the market maker is long calls at 6860, price is at 6855, and the clock is ticking: the calls decay from 40 delta to 30 delta — buy futures back (lift). Price drifts up, gamma kicks in — sell futures (resistance). Decay continues — buy again. This oscillation centers on the strike. “It's almost like two magnets pulling each other together.”
Time-Based Pinning (Not Just Spot Movement)
Pinning is not driven solely by spot approaching the strike. The passage of time itself pushes toward the long strike. If price is below the long strike with minutes remaining, delta decays from ~35 toward 0 via charm — the market maker must buy futures back, lifting price toward the strike. If price is above, charm drives delta from ~60 toward 100 — the market maker must sell more futures to grow the short hedge, pressing price back down toward the strike. Buy from below, sell from above: both point at the strike. “The passage of time also pushes me back to my strike.”
The Call Wall Is an Area, Not a Line
“Call wall is just a term for an idea” — “a dense area of local long gamma… don't think of it as a flat line. Greeks don't behave that way… gamma doesn't distribute horizontally across a strike. Just understand that it's like an area. Give yourself more tolerance.” Identify it as the area that's most long gamma on the profile; it should correlate with positions, “especially when that area has a very obvious largest position in the range.” In Dan's example the stopping force doubled into the wall itself — an approach exposure of “170, 180, that's almost half what you're getting here. So it's double” — and “I can almost count it on one hand sometimes how often we break through a call wall.”
Why it absorbs: “for a fully hedged option, it can absorb up to 2 times the quantity in futures” — a 10,000 lot can absorb 20,000 futures as a hedge. “This is where the selling comes from when we're rallying through long gamma.” Dan rarely says “gamma wall” himself: clustering long gamma “creates a Vega problem for the market and a local gamma charm problem.”
Hedging Lands the Market on Dealer Longs — Adverse Selection
“It's exactly the opposite of what most people assume market makers do” — the hedging flow “is pushing the market to land on their long strikes. Terrible outcomes for the market maker.” It's adverse selection for the dealer, not the customer. The settling condition is what Dan calls normal: “What's normal? Two things. Time passing. And vol declining. What's abnormal is vol going up for some reason.” Anchor strength comes from density — you'd rather see “a normal distribution with a clear peak in the dealer long side,” where instead of trading “10, 15, 20 futures every time you move a dollar… it might be hundreds and hundreds of futures per dollar” on limited movement. Zero-day dealer-long nodes “will become the centering position, the center of mass if you're around it.”
Where Dealer Longs Come From: Overwrites & Vol Harvesting
“When you see a lot of dealer longs built up, oftentimes that's part of a vol selling program, like a vol harvesting” — iron condor sellers who “would trade 200,000 iron condors across the first eight weeks and they would just sit there… set and forget… they leave them to expire.” A classic source is the overwrite: it “sells 2% up all the time,” generally around 35 days out, and the positions “exist until expiration, they never go away.” In a rangebound market those rolling 2%-above-spot strikes stack: “you get a lot of clustering near the money, near spot. So it produces a lot of gamma.” “These blocks here, these are persistent. There's a pattern… when the market starts to get rangebound… it allows them to create patterns.”
When a market maker is short an option (customer bought it from them):
As price approaches: Negative gamma forces the market maker to chase the move — buying as price rises into a short cluster above spot, selling as price falls into a short cluster below spot. The closer price gets to the strike, the stronger the flow. Vol surface adjustments make this even faster than Black-Scholes implies, and skew tends to make the downside test sharper than the upside. Either way, it accelerates price toward the strike.
If the test fails (price doesn't decisively break through): The option remains sub-50 delta. At expiration it goes to zero delta — all of the delta hedging must be unwound. Whatever move was attributable to gamma gets completely reversed.
If the test succeeds (price breaks through and sticks): The option transitions from out-of-the-money to in-the-money. Hedging flow doubles as delta moves from ~30 to ~100, producing a continuation and redrawing the charm profile.
You Can Never Pin on a Short Strike
In every direction, the hedging pushes price away. Rally through shorts? Buy more futures (chase). Drop back below? Sell futures (pressure down). Every outcome repels. “It's like two magnets of the same pole — they just can't stick together.”
The Anti-Pin
Isolate a dealer-short call as price rallies toward it: the dealer keeps “buying futures, buying futures, buying futures, but we stop somewhere. It's like a 45 delta.” The option is still not in the money, “and so as time passes, it's still going to go to zero… This dealer short option, if you isolate the mechanics of it, is like an anti-pin.” The usual outcome at a dealer-short strike is a fade back away from it. The extreme case shows why: an out-of-the-money call “is gonna have its delta dragged down to zero and your hedge will be sitting there naked like a sitting duck and you have to sell it out. That's that unwind.” It won't be immediate — “charm is not actionable on a 49 delta” — but the extreme tells you how important these test levels are.
Positions Are Not Gamma
One of the top mistakes Dan calls out: “people look at gamma and think, 'Oh, it just means you're going to race through it.' No, there's multiple things that happen at the levels. There are customers that have these options for a reason, and they can reverse the market at their levels.” Big dealer-short levels “often create tests, where we don't necessarily blow through them… yes, positions create gamma, but positions are not gamma.” Owning a call “gives them the right to engage the market in the opposite direction” — delta that's making money gets monetized by selling delta. “Imagine you're the customer. You bought a million 7510 calls, and now we're trading 7515. Do you keep them?” They're likely to close, so “you don't assume continuation. You have to kind of bake in the risk of reversal due to the customer close… What you don't get is automatic extension.” And when Dan says “positions,” he is “never talking about… gamma or charm or any Greek by strike” — contract positions only.
The Hedged-Market Maxim
“If the profile is short a lot of puts, you shouldn't expect it to sell much because customers are already hedged.” The same anchoring logic applies on the upside: chasing a move “requires some active flow to get us in that direction,” and “if customers are all positioned in long call options, they don't really have as much of a reason or impetus to go buy the underlying delta itself. That's the same anchoring principle beneath that whole maxim about a hedged market never sells off.” The caveat: heavy downside hedging “produces a weighted distribution where in the 30% chance we get a sell-off, it will be more volatile because of this.”
This is the core trading framework for reading positions. At any given time, identify three points:
Upper Test
Peak of short option cluster above spot. Marks the upper boundary of the expected range. Repels price downward if tested.
Anchor / Equilibrium
Peak of long option cluster. Where charm decay drives price action to rest. The end-of-day target if tests hold.
Lower Test
Peak of short option cluster below spot. Marks the lower boundary. Repels price upward if tested.
The Test-Anchor Framework — Short options define range boundaries, long options attract price through charm decay
Use the straddle price as your range estimator: Spot ± straddle price gives you a rough range. Within that range, look for tests and anchors.
Containment Odds at a Test: 65/35
A test level is “a local maximum on the dealer short side or customer hedge side.” When price moves in the direction of that local max, Dan handicaps it: “I'm thinking there's like a 65/35 chance we actually get contained by this position.” Containment compounds: “if we get contained in this position… the market maker position will begin to reinforce the containment… what I'm looking for is where does charm pressure guide us inside the range.” Don't demand tick precision at the lines — “some of that is just your imagination, looking for influence, because you can't actually be that precise,” and “there's no perfect rule… that declares it a pass or a fail.” In Dan's terms everything resolves to “balance or test”: balance points “are always going to come from market maker long positions and test levels are usually market maker short positions.”
Test / Balance / Acceptance — the Morning-Slides Vocabulary
The official annotated guide draws the same framework on a stylized book with three named terms. A test is a short cluster the tape has to fight through — hedging there trades with the move, so a test either rejects price or accelerates it. Balance is the long cluster the book pins toward — hedging there leans against the move, and as the session decays, price tends back to it. Acceptance is holding beyond a test instead of rejecting; once a level is accepted, the read hands off to the next cluster on the book. Dan on where the balance actually sits (#general-chat, Jun 17 2026): “in general the pinning influence in any given range is such that the market tends towards the dealer's largest LONG gamma level from the expiring position — that's usually an actual option line held in outsized quantity (long) by the market maker.”
Trading the Rejection
The rejection is the trigger: “when you hit a test level, and you don't violate it… that's when you start observing.” Dan's ritual at an upside test: “when we hit 7450 on the way up, the first thing I'm thinking when we don't pass it is: What trade makes money when we get to 7425? And how fast we get there?” This is where you start to get trapped in a range. Same on the downside: “if we're selling off towards a test level, but we don't cross it, then I know that the model will eventually produce on the simulation gradient bullish charm above a test level. That's what gives me the ability to plan trades to have entries, exits.” Even after losing another $10 into a lower test point, “you're still looking for an upward bias because these options would be compelling you to drift a little bit higher.”
What Breaking the Level Actually Flips
“Inflections are created by where the clusters of shorts converge and become the largest in the position.” Hold the level, and the expiring open interest — “the stuff that's still held and hedged by market makers that are not engaging in a massive share of the volume intraday” — “will have futures to buy above the level and sell below the level… That's what I'm looking for in the positions all the time.” Lose it, and “the position charms down, not up… you get a pretty strong sell pressure as those puts go from 50 to 100 delta instead of 50 to zero” — it “becomes really difficult to chew yourself out of those positions sometimes.” After a genuine break, “the highest probability outcome… is to stay between that test level and the next test level, that's like the primary range now, and find balance at the market maker's long.” One tell to distrust: price that keeps coming back to a broken test — “now we keep returning, returning, and returning. That almost is like a thin ice game to me.”
Key Principle
“A position is going to be stronger than any single option.” Look for structure and shape — a distribution of longs or shorts across multiple strikes. A cluster that looks like a distribution produces consistent charm across a range. A single isolated option doesn't have the same staying power for planning trades.
The opening position matters most. Dan emphasizes that the morning position tends to be remarkably sticky throughout the day because it's dominated by structural players (firms managing positions for weeks, not intraday). Intraday volume is largely HFT netting, customers closing by end of day, or shuffled positions. There's a tendency to revert toward the opening position.
Why the Opening Profile Reverts — Firm Type Reasoning
There are specialized zero-day firms that “don't even trade tomorrow” — high turnover, focused on internalizing delta and minimizing transaction costs. Then there are structural firms (like Belvedere) that carry positions for years, treating zero-day options like any other option, with much lower turnover. Positions going into the day are more likely held by structural firms whose hedging persists throughout the session. Meanwhile, HFT volume washes out and customers close positions by end of day, naturally reverting the profile. This is a concrete reason to respect the opening profile over intraday changes.
Practical Tip
Click the “Live” bubble to switch to “Historical,” go back to 9am, and study the opening position. That position is your foundation for the day. Intraday changes are noise more often than signal.
Blue Dots & the 9pm Snapshot: Expiring Open Interest
Dan's reference point for the foundation position is the comparison state from roughly 9pm the prior evening. “I just rely on the way the position looks after SPX reopens in the next proper trading day… basically 9pm just captures that without adding much variability… a more formal term for it might be the expiring open interest.” The blue dots show “the position in the zero day options when they were not zero day… already there as of the close yesterday, so it's not the intraday noise stuff… in the hands of someone with a pretty stable hedging process.” “They're not going away today… a lot of that set-and-forget stuff creates influence all the way to the very end, and that's gonna be seen in the blue dots.” Everything added since is intraday and “has a tendency to revert to close because most customers trading intraday are active and they will close positions.”
Prefer Levels Backed by Blue Dots
When two levels compete, take the one with the blue dot: “The reason I say 7430 is that blue dot there. To me, that represents a more stable position. Whereas this might disappear, might not be hedged the same way.” Underneath the day's bars “there's this ghost position, this foundational position underneath the structure, these bones… that inventory is still being hedged continuously intraday as part of their overall book.” Even positions traded yesterday around data releases count: “I still just use the blue dot framework… anchoring to the yesterday 9pm comparison state.”
A Giant Bar Still Needs Delta
“The bars might still be huge, but if the deltas are tiny, there's no more hedge really associated with it. Don't look for things that aren't there. A giant position bar — you still have to have an option that has delta for it to be actionable.” Far-off strikes with 12,000 or 8,000 lots “sometimes distort what's meaningful. So I always recommend zooming in and looking at the actual levels” — it's all relative; a level doesn't need a huge bar to matter. Tight spreads set the same trap: with a $110 zero-day straddle, a 30,000-lot spread drew a bounce $70 down, “and then the market fails through… There's no dynamic influence when you're talking about a 37 delta, 37.3 delta call spread. It is a ghost. It doesn't exist.” The bounce was tourists trading the big visible bars, not hedger delta.
One Ingredient in a Giant Soup
Position bars “are not necessarily indicative of the overall gamma regime.” “These are one ingredient in a giant soup, and the soup is modeled on the gamma gradient. This involves positions expiring Monday, Tuesday, Wednesday, Thursday, the week after, the year after, it's everything… you throw these ingredients in, and they get spicier and spicier at the end of the day.” One short strike doesn't flip the book: “this position gives you ingredients in your soup of Greeks, doesn't give you a new soup… But the soup might never be spicy because all the other stuff is dull and muted.” When your actionable slice diverges from the whole, respect the whole: “you can't expect the market to settle down on a zero-day position in March quarterly… the whole thing is still short gamma… you can't expect the precision of a pin.” Dan's closing rule: “Use the positions as your guide, but then correlate it with the overall map.”
Clean Structure (High Signal)
A clear cluster of shorts at one level and a clear cluster of longs at another. Stable charm path, consistent behavior. Trade with conviction.
Fishbone Structure (Low Signal)
Alternating long-short-long-short across strikes. Charm alternates direction and degrades. No stable range, no tradable process. Scale down conviction or sit out.
Scale Bets to Conviction
Like any good betting system: scale your bet according to your estimate of efficacy. Clean structure = high conviction = size up. Fishbone = degraded signal = size down or skip. “This degrades everything.”
What Good Shape Looks Like — and When Fishbones Wake Up
“The best profile is a clear profile where there's a position that has a cadence or a shape to it. And the best positions are going to look like spreads” — “a generalized version of a spread across more than one or two strikes.” Structure is the reason to gear up aggression: “the hedge influence is more widespread. It's not only stronger, but even more importantly, it's persistent.” Alternation has a timing wrinkle: “as the straddle decays and gets smaller and smaller and smaller, the options that have charm get more and more specific and local.” With a $30 straddle, alternation “disappears into a sea of Greeks”; once the surviving strikes sit a 21-delta/5-delta spread apart, the alternating finger bumps show up on the charm profile — and “when you see a lot of degradation or flipping of the charm, it's less tradable, obviously.”
Gappy Positions: The Real No-Man's Land
Beyond fishbones there's a third profile type: “properly, like, just gappy positions when there's almost no inventory — when you look around it's like 100 lots strewn about, and sometimes strikes with nothing for a long range and no shape coming from the position.” Dan's warning: the market doesn't understand that there's actually more volatility coming from that position than from a position that is short options. A profile with a clear shape — even a simple fly with defined boundaries — is not no-man's land.
VS3D provides multiple ways to slice position data across expirations. Understanding the trade-offs between views is key to forward-looking analysis, especially into OPEX week.
Positions by Strike (Combined View)
Combines all expirations into a single chart. Benefit: Shows the net position at each strike level across everything. Trade-off: You lose visibility into which expiration a position comes from. A Tuesday 6,600 put is very different from a Friday 6,600 put in terms of gamma weight and timing.
Position Grid (Table View)
Same data as Positions by Strike, but displayed as numbers in cells organized by strike and expiration date. Each cell shows net long/short position. Benefit: You can see exactly which expiration contributes what, all on one page. Use case: Detailed research, tracking how positions change across dates, identifying where big structural hedges sit.
Custom Expiration Filtering
In either panel, use the “Custom” expiration selector to narrow or expand which dates you see. For next-week analysis:
- Add each day individually (Tuesday, Wednesday, Thursday)
- Friday has two entries: AM (traditional/monthly settlement) and PM (weekly settlement). Both are relevant but serve different purposes. As you approach OPEX, AM positions often carry bigger structural hedges.
- Expirations extend out ~7 months, but for gamma analysis, focus on the nearest 1–2 weeks
Strike Grouping / Bucketing
For longer-dated positions or when the per-strike view is noisy, use strike bucketing to group strikes together (e.g., every 25 or 50 points). This reveals macro imbalances that get lost in per-strike noise—areas where net shorts or net longs cluster across wide ranges. Especially useful for out-of-the-money positions where individual strikes are small but aggregate positioning is significant.
OPEX Week: Stair-Step Positioning
When analyzing monthly expiration (AM settlement), look for the “stair step” pattern Dan describes—descending position sizes in the direction of travel. This is the macrocosm of the daily charm-up or charm-down structure. If you see ascending dealer longs stepping up through strikes with decreasing size, that's a charm-up structure into OPEX. The rate of change of position relative to spot (dPosition/dSpot) tells you the direction of the charm bias.
Noise Warning
Combined views can be noisy. Dan recommends isolating specific expirations for cleaner signals: “I'm going to narrow this down to just what February AM looks like… almost like a magic eye poster, you kind of see a structure.” Start with the monthly expiration to see the structural skeleton, then layer in daily expirations for tactical overlay.
Charm Flip Areas
When scanning position structure, look for the charm flip—the strike level where the charm profile changes from positive to negative (or vice versa). This is critical for trade planning:
- If you can get through a charm flip area: Decay shifts to your side, supporting continuation
- If you get stuck before the flip: The existing charm profile works against your position—“you have to be cognizant that net net, you're going to wind up dealing with an automatic buying flow”
- Use charm flip levels as binary decision points for trade management
Which Expiration to Trust
OPEX ranks nearly with zero day: “it's like almost as big of a deal as whatever the zero day is all the time, and when it's getting close it's even more of a big deal… sometimes that's actually more important than zero day — zero day is kind of noisy.” For the wider range: “when the market starts to get volatile, it tends to explore the test levels… Look at the next opex, use that as your guide for the range, because the bigger players… are using serial opex, they're using quarterly positions. They're not using zero day all the time for wider time frame.” For today's close, rely more on today's expiration than tomorrow's — tomorrow's hedges are fielded by structural desks (Belvedere, CTC types) who “are going to hold it probably until expiration,” so Dan doesn't apply the morning framework to them.
Grid Workflow: Widen Until Structure Emerges
Dan's grid pass: “I like to bucket by 25s and by weeks when I'm assessing the path through a space, because I want to see, are there clusters of longs that generate a persistent trend? Or are there major short levels that persist across time?” On longer tenors, “you're not getting a lot if you're looking at five point widths… if you group even larger by 50 points, then you can zoom out, you see a position emerge… where longs are clustered, where shorts emerge.” When shorts stack across “a series of expirations all the way out through the end of the year… this tells you a lot about where you should be looking” for the market's major stress points in a real range-flipping selloff. Two reading tells: “you don't want to over-assume that these larger one-day positions are meaningful, they're not,” and short levels built across time in an ascending arc aligned with the forward “tells me this is a professional” — confirm with the Firm participant filter.
Intraday Negative Gamma vs Gamma Holes
Weight negative gamma by where it lives in time. Zero-day negative gamma “comes and goes, it's ephemeral… it has its own shot clock on it… gone tomorrow. Might be positive gamma tomorrow” — and “it's never going to be as powerful as, like, the negative gamma we saw in March quarterly.” The real problem is “a giant gamma hole that lives in longer-dated positions that aren't gonna be closed… 7 days out, 5 days out, 4 days out, like, that is a problem for the market.” Positions market makers can't close and reset create “bigger problems, like more erratic behavior, bigger violent moves.” The grid shows you where they sit — dealer-short puts stacked “throughout the lower half of this big range, 7200, 7300” leave the whole profile with less gamma when trading the lower half. Strong moves come “when there is alignment.”
Chapter 4 — Quick Reference
Daily Trading Workflow — From opening position analysis to trade structure selection
Compare Against the Series Reopen, Not Yesterday's Close
For his day-to-day planning Dan does not compare against the market open: “I actually go back to the time the series opened… for most days it's t-minus one and it's about, I used 9:00 p.m. You could use 8:30. Really, I want to just capture the reopen of the series.” Why not yesterday's close: “the window between the end of what we call the curb session, or I think 5:00 p.m. Eastern, and the reopen, which is like 8:15 or 8:20 p.m. Eastern, that window involves trade reconciliation” — positions moved between accounts may not be captured as of the close; at the reopen it is all settled.
Converting the Logic to Futures
“I talk about this through the lens of options, but it's useful for futures, too. You just convert my logic to a futures trade… I wouldn't expect a market that drifts to overshoot a gamma cluster that much.” At a test level the short is asymmetric: “you have maybe 10 point stop loss and honestly like a 50 point target.” Picking the target: “Target is the maximum long gamma cluster in the range… or it's a good charm flip.” Manage toward the pin, not through it — on a charm-up path to a 7585–7595 zone he holds toward it, “but if we hit 7,600, I'm gonna cut.” And never hold a short through a lost level: “my whole thesis is that if we stay above this level materially and then time passes, the passive flow that I was relying on to reinforce my short is actually long in my face.”
January 14th — Clean Setup
Prior close: 6963, just below a cluster of market maker shorts.
Upper test: ~6985 (clear peak of short distribution)
Lower test: ~6895 (short cluster boundary)
Anchor: ~6925 (dealer long peak)
Result: Market sank from open, tested the lower boundary, failed to break through meaningfully, and closed right at the anchor as charm drove price there in the 1:30-4pm window.
Overnight Sell-Off Day — Wide Range
Setup: Massive overnight hedge created a large downside position. General “decay up” structure visible.
Tests: 6890 (lower), 6965 (upper)
Action: Market bounced overnight test, straddle began decaying along charm path. Once price resolved above 6890, the structure shifted to charm-up.
Result: Explored the upper range, failed to break 6965 meaningfully, settled within the range as expected.
Dan's Approach
“I've gotten to the point where I don't even really need to look at the gamma profile or the charm profile. I just look at the position and the straddle price and I get all the information I need.”
Straddle Price
The at-the-money straddle price represents your expected movement — slightly inside one standard deviation (~80% context). It's the benchmark for range estimation.
Use it as a range tool: “I literally take the straddle price and add it and subtract it like a range in my mind.” Spot ± straddle price gives you the approximate test boundaries.
Straddle decay verification: If the straddle is NOT decaying through the day, charm is not the dominant force. This is your cross-check. On event days where straddles reprice higher, charm signals are unreliable.
Straddle and Greek distribution: The straddle price tells you how Greeks are distributed. When the straddle is $30, gamma is spread across a wide range. When it's $7, gamma is concentrated locally. This is why the market becomes “more local” toward the close.
The Straddle Lines Show Where Charm Lives
Dan's fuller articulation from the June–July 2026 sessions: the dotted straddle lines on the position panel are the mean absolute deviation — “it's actually about 80% of the one standard deviation… the zero-day straddle is going to be the expected range for the day forward.” The reason the lines matter beyond range: “It also tells you where Charm lives… one standard deviation is pretty much where charm is most intense,” and the straddle line sits at 80% of that distance. At the money there is nothing to decay directionally: “These options here in the middle have no charm… this straddle's still gonna be 50 delta.” The platform shows the 1× straddle by default (0.5× is available), updating with the live straddle price through the day.
Four Straddle-Line Reads
The ends of the lines: “Whether positions cluster and lean long or short should tell you something about whether price is being pushed away from those dotted lines or pulled towards them.” Juxtaposition: where “the higher blue line is on top of a long position, and the lower is on top of a short position, you should start to expect more aggressive charm-up behavior… as it converges, the charm path will get stronger.” Creep: if the boundary “starts to creep in and look like it's between these strikes, that's what produces like a consistent push down.” Next influence: “at the end of that range, that's where you should look to see what charm influence is coming next.” Sanity check before trusting any far cluster: “The option has to have delta for there to be a continuous process around it. And so use the straddle boundaries and the option deltas as your guide.”
Boundaries for Evaluation, Not Targets
Dan's own framing of the dashed lines (#general-chat, May 11 2026): “this is why they are more like 'boundaries' for evaluation than 'targets'; make no mistake… the effect of charm+gamma as the positions expire does not point to the dealer's largest short strike.. just the opposite (the balance points are the largest clusters of dealer long options in the range).” Inside the boundary, expiring-position hedging dominates; through it, the character of the tape changes — but nothing about the line itself says price must travel to it. The optional 0.5× straddle set marks the tighter zone where pinning behavior concentrates late in the session.
Critical: Gamma Can Absorb Charm
Even if charm shows a clear path, you must calculate whether gamma along that path will consume the charm flow before it reaches its target. The profile can “consume itself.”
Example from Dan: Imagine a long option cluster at 6940 with a 35-delta (only 35% hedged). Charm from smaller options below generates ~400 futures of buying pressure. But that 6940 option, when fully hedged, can absorb 3,400+ futures. It still has 65% more hedging to go. So the 400 futures of charm flow get swallowed by the gamma hedging of one single larger position.
This is why Dan sometimes predicts a pin that's off-target from the biggest dealer-long cluster — the charm flow can't actually get through the gamma barrier in front of it.
The Mental Math
For each option in the path: check its current delta, calculate remaining hedge needed (delta to 100 or 0). Sum up the futures required. Compare that to the charm flow being generated. If gamma absorption > charm flow, the charm signal won't reach its target.
Short Options, Breaks, and the Passage of Time
“A lot of people have this misconception that once we make it through a big strike or a big gamma level that we just explode higher. It's not the case.” A short upside call “is two things. It's suppressive charm when the move doesn't materialize, but it's also potential accelerant when the move does” — it shows up as negative gamma to the upside.
The mirror mistake is shorting into negative gamma below: “they see, oh, there's a lot of negative gamma, and you fight the passage of time… Time will always pass. You cannot say though that 100% of days someone will sell actively through this.” A sell-off needs three things: “There needs to be a bias in the order flow. That bias needs to be negative and it needs to be substantial enough to overcome the rest” — while the default case, the charm influence, is already working the other way.
Gamma Max = Blue Over Yellow = Pin Target
“If you're looking at a gamma maximum, you should see that show up in charm too as a place where it's blue over yellow. Because a gamma maximum is anchoring at the end… when you see this red max line in the gamma profile, you should expect that that's pretty close to a charm convergence, a pin target at the end of the day.” Move up or down in spot and you get reversion toward it; advance in time and you get convergence toward it. Live example that session: 7340.
Gamma Min = Yellow Over Blue = Repel Zone
“The short gamma max or the raw gamma min in that range, that's going to be yellow over blue. Yellow being supportive, there's a bid coming in this range. And blue being suppressive, there's a sell there. That's not a pin, right? That's like two magnets of the same polarity. You can't stick them together.” A place price pushes off of, in one direction or the other. Live example: 7412.
Where This Read Lives & the Futures Coloring Caveat
These stacks are read on the charm gradient (the Gradient Chart with Charm selected). The blue/yellow language is Dan's colorblind stream theme; on the platform's default palette, positive charm renders red and negative green, so the same pin reads red over green (see 7.7) — “make sure your color exposures are mapping correctly.” Some charm maps flip the scheme entirely to show the end result for futures (what the dealer will do): positive charm = dealers sell = orange (sell pressure); negative charm = dealers buy = blue (buying). On that convention the pin reads orange over blue — same mechanics, opposite colors. The flip applies to charm only: gamma keeps long = blue, short = orange on both schemes.
The Charm Fade — When Your Buyer Becomes a Seller
“A market that's balanced because of my buyer is not balanced when my buyer turns into a seller. There's your charm fade.” The same flip creates the level-loss edge: “If we're above a level and where we are implies buying pressure, but we can't really get the job done to the upside and we lose that level even just slightly, the implication now is that that entity that was passively buying suddenly flips to a seller. That's where the edge comes in.” You don't need everyone's cards: “All I need to know is that it's balanced right now and I know one of those players is buying and they're going to flip to selling.” When known-bullish flows break state and turn bearish, expect the price path to “fall off a cliff.”
| Period | Time | What to Do | Dominant Force |
|---|---|---|---|
| Open | 9:30-11am | Check opening position, identify tests/anchors, note straddle. Avoid charm trades. | External flow, vol uncertainty |
| Midday | 11am-1:30pm | Monitor position stability. Use gamma for support/resistance. Charm building but not dominant. | Mixed — declining external flow |
| Sweet Spot | 1:30-3pm | Primary charm window. Verify straddle is decaying. Apply framework with highest conviction. | Charm (institutional trough) |
| Close | 3-4pm | Gamma becomes asymptotic and very local. Pin resolution. Expect final convergence toward anchor. | Extreme local gamma + charm |
July 2026 Refinement: The Day Is Three Segments
In the July 2026 onboarding sessions Dan sharpened the timing frame. The daily liquidity profile “is like a U. A lot of flows in the beginning of the day, the first 30 minutes… You get a low in the middle and then again a lot of flows at the end. And so the day is kind of three segments: active, passive, active.” His passive middle is “11:30 to about, I would say, 2 p.m. And this is not strict… I just think of, okay, London close and then MOC” — the window where “there's generally more chance of aligning with the charm implication.” By 3:00, “the close is coming, it's more and more active.” In the active morning he avoids charm entirely: “You almost treat all the levels as test levels in the morning. Clusters of longs and clusters of shorts.”
Entry and Exit Windows for Pin Trades
Entry: “I usually don't open a fly until around 11:30 Eastern because… we are most likely empirically to hit our test levels, even the second test levels, in the first hour, hour and a half of the day. That's when the market is most violent.” On a June walkthrough: “this is what I would put on at 10:30 in the morning, 11 in the morning… wait till RTM, London closed, all that good stuff.”
Exit: In an active environment he adds around 11:30 and looks “to close it around 2PM,” trading the segments individually — by 2:00 or 3:00 he is “very much inclined to close a big portion” of a working pin trade. His closing heuristic: “VIX is above 16, I'm gonna be more active in my closing.” The hold-to-the-close regime is the “lazy day summer trading environment” — a 15 to 16 VIX with 12 to 15 billion of market maker gamma on the profile, where pins get sticky.
Clock & Calendar Inflections (June–July 2026 Sessions)
| When | What Dan Watches |
|---|---|
| 9:30 cash open | With heavy gamma before the open (“10, 12, 13 billion notional”) and an overnight move: “is there a hedger that's turning on at the cash open?… It's not an extension of the move. It's the mean reverting effect of long gamma suddenly being hedged.” |
| 11:00–1:30 (buy-write cycle days) | XYLD-type buy-write funds “sell Delta between… 11:30 a.m. and 1:30 p.m.” The selling is front-loaded — “they will sell ahead of the time when the actual customer is selling” — so Dan looks “for a bottom sometime around 11 to 11:30.” At 1:30 the flow is absorbed: a top-and-fade in a weak tape, or an extension in a contextually stronger one. |
| 2:00pm | “The actual MOC, where the specialists on the NYC floor get information about the imbalances in the order book, is 2 p.m. Eastern” — “if you see big inflections in the market at 2 p.m. that's the real MOC.” If there's a big imbalance, by 3:50 “it's mostly traded out.” |
| 2:00 / 2:30 / 3:00 / 3:30 | “Times I look for U-turns on days like today” — the checkpoints for a turn on heavy trend days. |
| 3:00pm, VIX settlement eve | “Be aware today at 3 PM… VIX settles tomorrow morning… as VIX settles, sometimes we see some influence.” Empirically, “spot-vol correlation is higher on VIX settlement eves.” |
| 3:50–3:55pm | The published MOC print at 3:50; MOC D orders hit at 3:55. |
| Heavy down closes | Leveraged ETFs are “expected to have about… $8 billion for sale every 1% move… I'd be cautious into the close, because we see some strong turnarounds, too.” |
| Fed Wednesday | “Statistically, the move doesn't happen on the Wednesday. It happens on the Thursday and the Friday” — allocations get digested, then overnight markets move. |
| Monday after quarterly OPEX | “Monday after the quarterly has been very bullish” lately. |
What Actually Happens at the Close
Two opposing effects. Volume returns: “you have more volume at the end, so in theory it's maybe washing out our influence… we should maybe downregulate our expectations of edge.” But “the delta decay function, it accelerates. Gamma becomes stronger and more local” — which “makes it worthwhile sometimes to put on trades towards the close.” Every zero-day option is on a shot clock: “if the option has delta at 3:30, it's going to not have delta anymore at 4:00 in one second.” Two cautions. As the straddle converges, the zero-day contribution neutralizes: “if we're balancing around these levels towards the close, keep in mind there might be a reason to move away from them at the end and seek something like balance on the other side.” And with a persistent short zero-day profile, “it looks like we're pinning, and then all of a sudden eventually the market's hand is forced and either we push down quickly or push up quickly because there's no liquidity here.”
Honest Assessments
Not 100% predictive. Dan claims roughly 65% directional accuracy with reliability, depending on the time frame: “That's pretty good. I think that's about as good as I could hope.” The edge isn't in high win rates—it's in slightly-better-than-50/50 reads combined with structures that maximize gains and minimize losses.
Macro events override. Large external shocks can overpower all hedging behavior. Big seller programs, geopolitical events, earnings surprises — these are forces that drown out the options signal.
Position can change intraday. The live position may differ from the opening position due to HFT activity and customer closing. There's a tendency to revert, but not a guarantee.
A Weighted Coin, Not a Crystal Ball
“It's not a crystal ball, but it gives you a weighted coin. It gives you better probabilities with how you read this.” Dan's July 2026 calibration of the edge: “I'm anchored to know that I'm trading a 65 35 edge and that's really good. If I can find segments of time where that edge might be 70 or 80% that's amazing… In fact, probably it's more realistic to say it's a 60/40 edge.” Zero-day is a repeated game — “we can play the game over and over. So be patient. If it goes wrong, just manage your account well and play again tomorrow” — and he scores trades by framework, not P&L: a fly bought at $1.80 and closed at $2.10 was still “a loss in my framework, because we just lost the influence.” For traders with an existing edge: “never give up a winning strategy, never confuse your process too much.”
The Meta-Framework
“If you can learn to think like that instead of just up or down and where do we land, you'll do very well with this data. Think of three or four really highly probable outcomes that crystallize into one as the day unfolds.”
The Map Analogy
“The most responsible way is understanding it like a map. If you know the map of the terrain, you'll do better. But you still have to navigate responsibly. If there's a sharp corner and you accelerate into it, you're going off the road.”
In the July 2026 sessions Dan extended the analogy: “You have a map to the terrain, but every day there's different weather, there's different cars on the road. You have to still trade actively with it. It's a good guide, but it's not the only thing.”
When Other Cohorts Are Trading Big, Sit Back
VS3D models one cohort. “We have one cohort model, but if we have 10 other cohorts trading at that time and they're trading a big size, you should not be playing at the same stakes, right? You should sit back and let things play out.” On days loaded with outside flow (quad witching, a Russell rebalance) Dan folds good hands: “You don't love to over trade your hand… how many times have you played poker? Have you laid down a great hand because you're just sure that somebody else hit a straight?” The patience rule: “You almost want to wait for the boring day where there's nothing really going on. And you can be sure that the thing you can observe and track… is actually going to be a respectable part of the flow.”
Trade selection matters: In positive gamma, use spreads and flies. In negative/absent gamma, use single-leg options for convexity. Match your trade structure to the gamma environment, not just the direction.
Scale with volatility: On high-straddle volatile days, widen your test boundaries (consider multi-strike ranges). On low-straddle calm days, tighten to single-strike focus. Test levels are probability distributions, not precise lines.
Day 5 covered in detail how to structure trades using the profile—not just direction, but the specific option structures that exploit the gamma/charm landscape.
Why Not Just Buy Single Options?
On zero-day options, buying a single call or put only works if the move exceeds the option price and surpasses your breakeven. “Sometimes you pick the right option, it'll work out. You pick the wrong strike, it won't quite get there.” The profile tells you where the market should slow down—use that information to sell strikes at resistance levels and cheapen your expression.
The Fly (Butterfly) — Core Zero-Day Structure
A butterfly spread targets a landing zone using the gamma profile. You buy one option near current price, sell two options where you expect the market to stall (at a gamma resistance level), and buy one further out for protection.
Live Pricing Example (from Day 5)
| Structure | Cost | Logic |
|---|---|---|
| 6870 Call (outright) | ~$12.60 | Full exposure but need a big move past breakeven to profit |
| 6870/6890 Call Spread | ~$9 | Cheaper, capped upside, but still paying for time that might decay |
| 6870/6890/6910 Call Fly | ~$4–5 | Sell two 6890 calls (~25 delta) at the gamma resistance level. Dramatically cheaper entry with a decay buffer |
The Decay Buffer Effect
The fly's magic: the two short 25-delta options at the gamma resistance level lose value faster than your single long option. Result: even if the market doesn't move, the fly can actually appreciate in the short term (e.g., from $4 to $5 or $6) purely because your shorts decay faster than your long. This gives you a time cushion for the directional move to materialize.
What Kills Flies: Straddle Repricing
The worst scenario for a fly is erratic movement that causes the zero-day straddle to reprice higher without directional resolution. “If the straddle goes from 20 to 26 and we haven't moved, your fly is cheaper—you've lost money.” A fly is fundamentally a short volatility expression within a directional framework. Use flies when you expect the straddle to decay (low-event, charm-dominant environments), not when vol is likely to spike.
Dan's Default Fly Geometry
“Usually I default to, like, 15 points around the level. It's just easy for me to play this way. I pay $2 to $3, and I can make 12 max” — for example the 7410/7425/7440 put fly, bought “when we hit 74 half and reject.” He goes at least 15 points wide on either side: “it's cheap to lose.” The premium is the risk: “when you trade a fly or an option, your option premium is your stop loss, for the most part… I don't necessarily want to babysit a long future with symmetric risk, because if we get rejected here, I don't like losing 15 points.” Options work as “embedded stops” against a future's asymmetry of “a violent move the other way, or it's a slow grind to your stop.” In a light-gamma profile he'll take a put spread over singles: “I hate to babysit trades… I like smooth equity curves.”
Sell Where the Market Goes To But Not Through
The one-line placement rule: “You always want to be selling options where you expect the market to go to but not through, to extract or exploit the theta and the declining realized vol at your target.” Construction follows the same logic: “I'm buying strikes I expect to kind of rifle through… And I want to sell the option that we're gonna land on, I'm gonna do well over time.” Where dealers are long, the market is stickier: “Sell the strikes you expect the market to stick to and then allow the mechanism to work in your favor.” And when you do not expect a pin, skip the fly for an out-of-the-money spread: “Why out of the money call spread? Because I want gamma. I don't want a fly. I don't think we're going to pin there.”
Fly Discipline: Patience in the Range, Puke on the Break
Don't expect the fly to pay on the move itself: “It's not going to be a huge winner when you get this move. It won't be. It'll frustrate the heck out of you… You never really had any real delta, you have a conditional.” The exit trigger is the influence, not a price stop: “When you lose that level, that's when you want to puke it, or close it… you have decay on your side for a period of the trade.” Environment matters — Dan got flies publicly wrong twice: April 2025 (“I predicted the center wrong, and we overshot it, and almost pinned my long”) and a recent gap sequence — “you don't want to own flies in really volatile environments.” And beware the perfect win: nailing a pin “is also the worst thing to happen to a trader that's kind of new, because it will deceive you… you'll become just hyper-tolerant of risk, where you're certain to blow up.”
Structuring Around the Profile
- For upside plays: Buy call spreads or call flies. Sell strikes at the max-gamma resistance level (the red/green line showing exposure maximum). If gamma peaks at 6890, that's where to sell your short strikes.
- For downside plays: Buy put flies centered around where you expect gamma to become supportive. Dan's example: February 6500/6600/6700 put fly—conditional on a flush sending price into the 6700s where vol would reprice, targeting 3–5x on a small move, 10–20x on a full flush.
- Asymmetric risk: “Moving higher faces resistance; moving lower has range potential.” Use the profile to identify where risk is symmetric vs. asymmetric, then size and structure accordingly.
Trade Management: The Binary Decision
Dan emphasizes using the test-and-range framework for exits: “If I'm still in the trade here, it's kind of gambling. Don't want to gamble, so I cut. I can always re-enter any trade I want.” Zero-day options make re-entry cheap—there's no reason to hold a losing position through a charm flip when you can restructure for the new environment.
Equity Replacement With Calls (and the Tenor Rule)
At the right inflections, “you can switch your equities to calls… a long call instead of straight up equity is kind of like a hedged book,” and spot-vol correlation can pay you on the way up: “We raise those straddles aggressively and that pays you off.” Specifics: one- to three-month calls, at the money down to 30–20 delta — “the delta in your call option will actually perform better than the equivalent delta had you just owned stock. And if you sell off, well, you only lost a small premium instead of your whole book.” Timing caveat: “You would never want to do equity replacement on like a shallow dip with a V spike to 20 in VIX. You'd get hosed on the rebound.” The tenor rule for any long option: “If this option falls into a 3-week window, good luck, it's gonna rot. But if it's a 3-month option, or 2-month option, and you start to move in that direction, and vol starts to reprice, there is no decay yet to worry about.” You are not holding to the strike — “it's the vol dynamic that gives you additional convexity.”
Calendar Spreads (Brief Introduction)
Matt (co-founder) is a “big calendar guy”—long calendars selling ~3-month options and buying ~6-month options. For shorter timeframes:
- Sell where gamma is (where you expect the market to stall), buy further out in time
- Calendar opportunities are especially good when there's a bifurcation across an expiration date—where the position structure changes dramatically after a specific expiry (e.g., monthly OPEX creating a before/after shift)
- These moments are rare but powerful—“you can see them here. It's rare to have such a bifurcation across a date. But when it does, those can be really good calendars to buy.”
Time Spreads Go Short Gamma Into the Close
A caveat for short-dated calendars: “If you have a spread that's, like, a today to tomorrow spread, a time spread, it might look gamma neutral for a while, and then today it's gonna start to look like you're short gamma, if you own it… and you will be short really, really a lot of gamma into the close.” The expiring leg's gamma increases at an ever more rapid rate as the clock ticks, while the deferred leg's one extra day of time creates vega.
Market Maker Concentration Discounting
When market makers accumulate large inventories of a particular option, their pricing algorithms discount them—they don't want the concentration risk. This creates opportunities: calls that appear cheap on a model basis are cheap because of inventory, not because they're bad bets. Dan references Chris Sidio identifying this in May 2024, when call wings were “priced way too low” after the March–April sell-off. The underlying inventory from higher-strike calls that became deep OTM was still requiring discounting. Result: “slingshot potential” in cheap calls that became great expressions for the recovery.
Day 5 featured a live CPI day where charm and Vanna were pulling in opposite directions—a common scenario in elevated VIX environments.
The Setup
- Charm profile: Indicated strong potential for a flush lower (passive selling flow from decaying positions)
- Vanna profile: With longer-tenor vol coming down, Vanna implied buying flow (vol declining = buy futures)
- Short zero-day positioning: Clustered across the mid-6800s, creating a tug-of-war range
- Dealer-long gamma: Mostly concentrated in the 6700-handle, providing support if tested
How the Tension Played Out
CPI came in slightly better than expected. Charm wanted to sell; Vanna from the vol decline wanted to buy. “The erratic behavior you've seen in the morning is partially reflective of the tension between this—as VIX goes lower, it's literally thousands of futures to buy across some of these big ranges. And then as VIX goes higher, the market turns around and starts selling off again because it reprises the whole vol surface.”
Critically: the zero-day options and the VIX-driven positions are different options being repriced. The zero-day is “just kind of grinding along doing its thing” (passive selling), while the Vanna from longer-dated positions reacts to VIX moves. The combination creates choppy, range-bound action with sudden directional bursts.
Dan's Resolution Framework
Once the 6850 level was claimed and held:
- Below: decaying short options (negative gamma, but positive charm—if selling abates, the straddle decay floats price higher)
- Above: max gamma around 6890 creating a slowing/channeling force
- Matt's target: 6880–6890 for settlement, based on charm pushing back up to the gamma resistance level
High VIX Complexity: Honest Assessment
“If VIX was trading 17 today, I would have said for sure we're going to have a really hard move down.” But with VIX in the low 20s and declining, the counterbalancing Vanna buying made the charm signal ambiguous. This is a case where scaling conviction down and using cheaper structures (flies, spreads) is the right response—you don't need to avoid the trade entirely, but you need to respect the complexity.
A Vol Move Can Drive a Truck Through the Gamma
“This is why, even when you have a lot of gamma, Vanna is important to be aware of. A big vol move can just drive a truck through all the gamma, very quickly. And same goes for charm… just put the numbers into context.” Charm is a passive force — “when vol is going up, for example, literally you're counterbalancing charm” — and “a big vol change is the one thing I think usually shifts us into a new range with its own determinism.” His sizing response when the two forces oppose: “it makes it a little bit of a wash, not as strong. I don't want to trade it as aggressively. Often times I'll just ride these out and set up swing trades, or I'll trade zero day structures intraday because they're more deterministic.”
Where the Gamma Comes From Changes Vanna's Power
“If you have a really long gamma profile and a lot of Vanna, a vol change can be super muted by all the gamma… and all the gamma is coming from 30 to 60 day options, a vol change can actually have more power than if it were mostly zero-day gamma, or 1 to 3 day gamma. If you have no gamma on the profile… it can move a ton.” At the vol-of-vol extreme, this is where edge appears: when “the VIX options have a lot of negative gamma and the S&P options create a lot of vanna… you can sometimes see moments where the index moves a lot more than is implied by any of the straddles… two times the straddle very easily oftentimes.”
Dan's Directional Accuracy Claim
“Depending on the time frame, I could probably claim 65% with any kind of reliability. That's pretty good. I think that's about as good as I could hope.” The edge isn't in high win rates—it's in combining slightly-better-than-50/50 directional reads with trade structures that make money when right and minimize losses when wrong.
Key Takeaway: Removing Bias
Dan notes the profile helps remove directional bias: “I can think we're going to zero tomorrow. But if today we get stuck in a range where it looks pretty compelling, I'm going to trade what I see.” The profile forces you to separate your macro view from your intraday execution. You can be bearish on a weekly basis and still trade a bullish intraday setup when charm and position structure support it.
Chapter 5 — Quick Reference
Dan walked through what actually happens when a large order hits an SPX desk, versus what Twitter and fintwit portray. The difference is enormous.
Tape notional is often misleading
The huge numbers that get thrown around — $50B in gamma, massive put prints — are frequently misleading. Most large orders arrive already hedged (“tied” or “laid up”). The bank acts as middleman, managing delta through their D1 team. The trade is negotiated in vol terms, packaged with a hedge, and then printed. By the time it appears on the tape, the futures impact already happened hours earlier.
Why order flow inference fails
“This is one of the reasons sometimes why guys who try to connect the order flow with time and sales and some assumption about the hedge asset have a really tough time — because that was hedged, you know, an hour or two hours before it traded.” A sell-off happens while the desk hedges against a pending order. Hours later the order prints on a rally. Time-and-sales inference reads it backwards.
Many large prints are spread structures (boxes, risk reversals, iron condors) that net to far less real exposure than the raw notional suggests. A box trade might show two enormous put legs on the tape but produce zero gamma because it's riskless. The CBOE's algorithm assigns individual prices to complex spread legs — “hundreds of strategies with 10 legs” on the complex order book — without caring about accurate buy/sell inference.
All market makers quote the same value
Dan described how if six different market-making groups are quoting for a broker order in SPX, they're on the same market. If one is different, “he just doesn't say anything” — he chats upstairs to tweak the model. There's almost no differentiation. The only real choice is: participate or don't.
Legal inside information
Why the desk view matters at all, in Dan's words from the summer 2026 Q&As: “If you get it right it's really powerful because you have literal inside information in the way that FINRA doesn't care about. This is not like an illegal inside information, this is just actually a big mechanical piece of the market otherwise.”
Dan confirmed that the hedging process behind options positions is rigid, automated, and fast. Once a trade is filled, the hedge fires in under a second — futures, SPY, internal crosses — all handled by systems collocated at the exchange. This isn't discretionary. It's a machine.
Instant calibration
“Before I can even say the word 'filled,' it gives me a report. I either internalize the delta or it went to market. At that same second, our vol changes, our whole surface breaks and changes to a new surface, and all that produces a delta change and a hedge.” Every firm has this system. The race to faster execution requires FPGA coding and colocation — you can't change the hedging configuration intraday. Dan's number on that rigidity, from the June 2026 sessions: “I paid a million dollars a year to FPGA programmers that could put the rules right there on the server… you can't flip a switch and change your logic that easily, and the competitiveness keeps a correlation there that you might not have in other products.”
The giant soup
How the book is actually managed: “We didn't think about every single position. We put them all into a giant soup and then hedge the output of the soup. It's not really possible to isolate one particular leg…” And the soup's output is hedged strictly: “It's a very competitive landscape and these positions are marked to market. This is not an opaque product… there's good reason to think that most of the entities that hedge this hedge fairly strictly.” Dan's own tolerance: “If our delta was off by a thousand minis, guess what — we're buying a thousand minis or selling a thousand minis.” Bigger books (Jane Street, Citadel, Goldman) can run larger offsets, and no one hedges dollar for dollar or minute for minute — “but they are hedging exactly what you see here.”
This constant calibration is what makes dealer positioning prescriptive. Every trade triggers a vol surface recalc, a delta change, and an automatic hedge. Multiply this across all market-making firms, all running the same process, and you get a deterministic hedging machine that creates a predictable path.
Tilting quotes instead of paying the spread
Futures are the default hedge — “the most stable asset… very clean, efficient in terms of cost to trade, how liquid the market is. At times, we use SPY.” But desks avoid crossing the bid-ask when they can trade into order flow instead: “If we're short delta in the book… we might give ourselves a little bit of a tilt in our quotes or our algorithms to sell puts or buy calls, just for the sake of trading into order flow, rather than just going and paying the bid-ask in minis.” Dan's other lever: “I'll have a tolerance around my position. I won't just hedge to zero all the time… I can literally say, when my quote gets lifted on a put option, don't hedge it. And so that's buying delta and it nudges the position back to flat.” The bottom line doesn't change: “we do have to get to Delta neutral.”
The prescriptive path
“Somebody gave you a code to how they're going to be trading over the next one day, one week. And they're a big part of the market. I can't see why everybody's not obsessed with this.” — The hedging is not a guess. It's a series of forced transactions dictated by the position, the Greeks, and the passage of time.
Why SPX and not single names or commodities
“What's most predictive about these is that it's required… The index options are not going away. They're a massive, massive, entrenched product.” The crowd is what keeps the hedge path readable: “You're not going to have this chronic correlation in commodities, because you won't even know the position necessarily. You're not gonna have this kind of correlation in single names, which are dominated by one or two market makers… I like SPX for that reason.” In a single name, a dominant market maker can choose to hedge a risk a little more lightly; in SPX it's a game-theory problem of roughly 17 market makers that might beat you to managing the risk.
Letting delta run overnight
The machine doesn't necessarily micro-hedge all night: “Their delta does something that we call run. We let our delta run overnight. That means that they have more to buy in a sell-off like this morning… if you let your delta and your gamma run for an extended period, you're going to have hundreds of futures to buy suddenly. And so that can actually reverse the market there. Those moments are very actionable, I find.” Instead of ten futures at a time through the night, the accumulated hedge arrives in a burst around the open.
Dan's argument for why zero-day options have changed the game goes beyond gamma mechanics. It's about information persistence.
Futures trade (old world)
A customer buys futures. Full delta impact at once — 100% hedged immediately. Then the trade goes dark. No ongoing information. No position to track. No machine managing it over time.
Option trade (0DTE world)
A customer buys a call instead. Only ~20% delta impact upfront. But now a position exists that must be actively managed. As time passes, the option decays into “hard delta” — forcing the hedge to look more and more like the full futures trade it replaced.
A readable machine
“You have a machine that's actually very, very active buying and selling futures based on levels, based on time to expiration, and based on implied volatility.” The 0DTE option trade leaves behind a position on the VS3D profile that is visible, trackable, and predictable. The market becomes more readable, not less.
If you understand the three dimensions at which delta can change (spot, time, volatility) and you know there's a machine hedging that delta, you have a framework that's prescriptive — even if it doesn't give you the answer to every test.
A shot-clock product that can only hedge itself
“There's a shot clock on these. Every day at 4 o'clock, these options meet their maker… it's zero or a hundred and hedge is unwound… this flow has to happen, kind of. So it's going to have a bias… You're flipping a weighted coin. And if you do that well, you'll be okay.” The convexity near the bell — an option can run through a 10-cent strike in minutes — is why “there's no way to really hedge that gamma effectively. You just don't want to have a naked exposure, so as a market maker, you cannot hedge zero-day options that are that sensitive with any other thing but a zero-day option.” It wasn't always like this: “We used to have Friday was the gamma option” — positions built on Monday lived all week, and “you didn't have charm as actionable.”
0DTE vanna is meaningless
Dan was direct: zero-day vanna is ephemeral. A vol spike raises premium by a few dollars, but it “comes out the next time someone sells an option.” Don't over-emphasize vanna in the 0DTE context — it's charm and gamma that drive the day.
Whose hedging are you actually reading? In the summer 2026 Q&As Dan described a bifurcated industry — he calls the split “an untestable hypothesis” — with two very different kinds of market maker behind the flow.
Vol-book firms (hold & hedge)
“I come from a firm where we used to hold and hedge positions… You give us a two-year put one-by-two way off the surface, I will trade it.” For this cohort “it's not about inventory spreading and turnover. It's about risk spreading and we tolerate the maintenance of inventory. And that means that at expiration, you still have a lot of stuff on your books.” These books “will hedge stuff until it expires and it stays there” — Dan calls them “the cleanest ones” to read.
0DTE flow firms (turn & burn)
“The zero-day options that you and I trade every day, the firms that dominate that order flow are fast and their business model is built on trading and turning over today's inventory or flow and leaving nothing else behind.” “They don't price tomorrow options. They don't have a clue what the position looks like tomorrow.” One shop Dan knows trades eight percent of the volume — and still calls him to ask what's happening in zero-day skew.
The structural risk is VIX options, not 0DTE
Asked whether zero-day options will eventually break the market: “When it comes to zero DTE, that was never my concern… It's a pretty stable product. I think personally, just my opinion, that if there's ever going to be a nuclear bomb in the market structure, it's VIX options.” He still sees synthetic negative gamma as “a big part of” how the market could go off the rails, and big VIX positions “are going to stand out and cause stuff.”
Dan walked through his personal trade structure live on the call. He called it “a very boring vanilla trade” — but one that works consistently in low-vol charm-dominant environments.
| Step | Action | VS3D input |
|---|---|---|
| 1 | Identify the charm bias | Is the in-range profile uniformly directional? All yellow (bullish) is stronger than alternating bullish/bearish. |
| 2 | Find the repellent zone | Short gamma strikes that price should drift away from. Negative gamma creates a force multiplier. |
| 3 | Find the target / pin zone | Long gamma strikes where positive gamma grows into expiration. Price should stall here. |
| 4 | Buy a call at the repellent zone | Price should be pushed through this area. You want exposure in the transition zone. |
| 5 | Sell calls at the target zone | Don't expect price to break through here — it should flatten and pin. Sell the strike you expect price to land on. |
| 6 | Structure as a butterfly | Cheapens the bet versus an outright call. The two short ~25-delta options decay faster than the long, creating a decay buffer. |
| 7 | Define the boundary | If price breaks through the long gamma zone and holds for a couple of periods, cut it. No commitment. |
The core logic
“I buy what I think price will go through. I sell what I expect price will go to. Charm tells me the direction. The gamma profile confirms we should get stuck around that level as the hedging materializes.”
The market is already in a fly position
Dan's cleanest statement of why the fly is the vehicle: “At any given time, if you think about it, the market's actually kind of in a fly position already, where we have boundaries and a target. And so I like to use flies to take advantage of that, because you get something like convexity.” The payoff math is the point: “It allows me to do things like experience convex payouts without actually paying for convexity the same way. Pay three, return 15. Pay five, return 50. I love those trades.” The short strike “is going to fund my trade so that I get two to three-x payouts more often than should be allowable.”
It also fits his risk DNA, formed on a hedging desk in the 2008 crisis: “I will never want to sell options as my first thing… I need to have something that embeds a hedge or an offset. Flies work for that. I'm buying options, and I'm selling options.” He credits the structure as “the most simple thing that's been the most profitable for me long-term… with a ridiculously smooth equity curve,” and likes it for zero-day “because it's like, it has to happen today.”
Pinning accuracy
In 2024's low-vol regime, Dan reported pinning within $1 of target levels 3 out of 5 times using this approach. He cautioned that high-vol / high-VIX environments make this much harder — throttle down expectations when vol-of-vol is elevated.
When flies fail
The worst scenario for a fly is erratic movement that causes the zero-day straddle to reprice higher without directional resolution. Flies are fundamentally a short volatility expression within a directional framework. Use them when you expect the straddle to decay (low-event, charm-dominant environments), not when vol is likely to spike.
In the summer 2026 sessions Dan added three execution details for the fly playbook:
| Detail | Dan's rule |
|---|---|
| Width | “You guys see I usually choose $15 flies. 10 are just too tight, but you can do either.” |
| Entry timing | “I wouldn't do it in the morning… there's too many active flows involved and there's too much vol of vol, too much ability for the straddle to price higher instead of being defined by charm.” |
| Sweet spot | “You trade to the middle of your fly, that's your best place to just sit because there you're short the straddle and it'll just decay for you… it really is like looking for pin targets.” |
Don't trade like the desk
“As a market maker, you don't trade like this, you really don't, and it's a really bad error that I've made. Trying to take market maker methods and trade like them, that's actually the wrong thing to do… You actually just exploit their influence.” The companion warning is about overplaying an edge: “I had a $10,000 trading account that I took to 1.3 million and then zero… it was about conviction and this idea that, well, when you have an edge, you're inclined to overplay it because you feel like you're in God mode.” He was 23; a planned 1,000-lot hedge never filled when his connectivity died into a June expiration, and the account was gone on a headline.
The interview surfaced several details about institutional mechanics that aren't in the onboarding webinars.
The IB Whale
A specific large trader who still routes massive SPX delta through Interactive Brokers — not Goldman, not BNP. He's been known to hold 100,000+ spreads at 50 delta. When his orders hit, a floor broker barks them out and futures sell off before the trade even prints because market makers pre-hedge. By the time it appears on tape, the delta impact happened hours earlier.
JP Morgan collar leaving SPX
The massive quarterly collar structure is being moved from SPX to a new CME product. Goldman wrestled the order away from UBS. This is a major structural change — VS3D's team is actively working to incorporate the new product into their positioning data.
Hidden OTC flow
There's a large institutional call seller who sells ~4,000 calls three days per week in a flex OTC product. This flow doesn't appear in SpotGamma, Options Depth, or any standard retail-facing tool. VS3D captures it because it comes from the C1 exchange.
Training economics
Belvedere assigned a $650,000 expense to each new trader's training. That gives context for why institutional-grade mentorship isn't cheap — and why the knowledge Dan brings to VS3D represents decades of accumulated edge.
The summer 2026 Q&As added three more desk mechanics:
Why price reverses off short strikes
“There's path dependencies we make as market makers that kind of would force the market towards a strike when you're approaching it. And then that relaxes and actually technically disappears when you're at it… there's like a thrust and a relaxation of the thrust, and then maybe the customer engages.” Dan calls the path-dependency effect a small feature — “the one that makes sense is mostly customer behavior.”
Wing options become straddles
“We rally all the way to the strike… instead of doing this dynamic hedging, we can just say… let's just hedge the whole thing at once. And so you turn this put wing option or call option to a straddle when you get there… especially on expirations and overnight where firms hold big positions at wing strikes.” The option comes out of the hedging model, and the leftover vol and gamma stays on as a lottery ticket.
March 2020: all manual
“In March of 2020, I think I was the most active market maker. This is not a joke. I was the highest-volume market maker on the CBOE, my individual acronym. And it was all manual. It was all me, 4 in the morning until I went to bed, on every platform.” When the floor shut down, the biggest SPX flow ran on chats, phone calls, and Bloomberg — the machine has a manual mode.
When asked directly whether VS3D should be combined with VWAP, structure, and TPO, Dan's answer was unequivocal: yes.
Fertile ground everywhere
“There is fertile ground everywhere… but you got to be selective and synthesize and kind of test and evaluate.” Dan referenced a former VS3D member who managed a $10 billion ETF and combined dealer positioning with S1/S2/S3, R1/R2/R3 pivot levels to great effect. The simpler the overlay, the better.
Dan's core message: dealer positioning is one big chunk of the puzzle, not the whole puzzle. It should be layered with whatever structural, VWAP, or profile tools you already use — adding confluence, not replacing them.
The predictive advantage
What separates VS3D from historical-based tools: “If we had a market that broke into a place where it never traded in history — which happens sometimes — we would still have a model that told us what has to happen when and where.” Volume profile captures the past. Dealer positioning is forward-looking. Both are valid. Together they're stronger.
| Dan's point | How to apply |
|---|---|
| Prescriptive path via gamma + charm | Use the VS3D profile to define the day's expected range and directional bias. Layer on your VWAP and structure for entry timing. |
| If/then scenarios, not fixed bias | Build two hypotheses each morning (long and short). Let the profile confirm which scenario is in play as the day unfolds. |
| Gamma needs a trigger — don't overtrade nodes | Seeing negative gamma is not a trade. You need an initiating imbalance. Single-factor confluence is a skip, not a trade. |
| Negative gamma + high vol = sit out | Know when the environment degrades the signal. Throttle down expectations when vol-of-vol is elevated. |
| “One big chunk of the puzzle, not the whole puzzle” | Treat VS3D as the dealer positioning layer. Combine with VWAP, TPO, and balance for full confluence. |
Pair it, don't replace what works
On pairing with VolSignals' own RTM model (balance points, trend, and reversion): “We use RTM similarly for this reason. And sometimes it's magical too how they, when they conflict, it's a tell. When they align, it's a strong trade.” And on your existing playbook: “Do not abandon whatever you're doing if it's working. Do not think that I have some holy grail… see what about your strategy can be improved with what you just learned rather than scrapping it… never abandon something profitable.”
Dan confirmed the same three books already in the Foundry curriculum:
1. Natenberg
Option Volatility and Pricing — The foundation. Options mechanics, Greeks, and pricing from first principles.
2. Bennett
Trading Volatility — The institutional perspective. Skew, term structure, and vol surface dynamics.
3. Taleb
Dynamic Hedging — The real-world application. How hedging actually works under uncertainty.
No book covers this — learn it live
The books build the foundation, but on option flows and market-maker hedging specifically: “Maybe I should write the book… you have to be a market maker first to really understand this in depth… there are public voices that I've traded with as market makers who speak on this stuff and they get a lot of things wrong too.” For the platform itself: “Just go through the onboarding — even in the Discord channel there's a lot of onboarding that we've just saved there… I really think it's better to do live daily sessions with the real market behind you because it's just a better way to get traction,” talking about “positions as they are now… instead of what they may have been six months ago during an onboarding video.” The commentary archive is permanent: “We don't delete things — you can literally go back in VS Pro and search my comments from like October 31st, 2023.”
Beyond books: “It's reps. It's just reps.”
Dan's training method from the pit
Every time an option quote came across the pit, Dan would mentally answer: What's my market? What's my size on the bid-ask? How do I skew it? If I get filled, what's my hedge? What's the Vega hedge? What's the gamma hedge? What's the next thing in my position I need to fix? Then evaluate whether it would have worked. “That was like 10 years of training in six months.”
The one-option drill
Dan's July 2026 version of the same rep-building idea, for anyone learning the charm mechanics: “Take one option. You sold an upside call. You sold an upside put. You bought an upside call. You bought an upside put. Just start with what's the initial hedge, and then fast forward to expiration. That will help you understand the charm influence… The more you do that… the quicker you'll get to intuit the outcomes.” And keep the goal honest: “Don't worry if it's confusing right now, enough reps it'll be easy. Doesn't mean you'll make a fortune… I found that I can know a ton and still be not good at trading… So much of it is like controlling your impulse. So… get the mechanics first and then work on making sure that you have a strategy that adapts to it.”
The maturity test
When something doesn't work, ask: Am I wrong in the framework? Yes or no? If the framework is sound, don't abandon it — throttle down expectations. If the framework is wrong, update it. “It's not 'it didn't work out, abandon.' It's 'no, throttle down expectations when vol-of-vol is high, when vanna is high, when volga is high — because those are all things that compound risk.'”
Chapter 6 — Quick Reference
A complete reference for the VS3D product itself — every menu, view, toolbar control, configuration setting, and documented calculation. Where Chapters 1–5 explain the concepts and strategy, this chapter is the literal map of the interface.
VS3D (VolSignals 3D) is a browser-based, real-time options analytics platform that visualizes actual market-maker and institutional positioning for SPX (S&P 500 Index options) and VIX (CBOE Volatility Index options). It processes CBOE/OCC exchange-level data and presents it through interactive bar charts, heatmap grids, and gradient visualizations. It runs entirely in the browser — nothing to download or install.
Stated capabilities
Analyze options positioning across strikes and expirations by participant type; visualize Greek exposure (gamma, delta, charm, vanna) as gradient heatmaps; replay historical sessions; stream live data during market hours; and build custom multi-view dashboards.
SPX
S&P 500 Index Options. The primary product — the focus of every concept in Chapters 1–6.
VIX
CBOE Volatility Index Options. Loads its own independent data stream. Switch via the product selector on any view.
Every view has a product selector to switch between them; each loads its own independent data stream.
VIX: positions, not Greeks
In the July 2026 sessions Dan explained why he reads VIX through positions rather than Greeks: “The VIX Greeks are not as stable as SPX Greeks. It's a very difficult product to model with any consistency. Even the market makers that I know that handle it very well tell me flat out that the Greeks are all BS because things break and shift so fast.” On platforms that do show VIX Greeks, “you're kind of getting just, like, guesswork.” Dan reports “much more efficacy using positions” for VIX.
Positioning data can be filtered by market participant category:
| Participant | Who they are |
|---|---|
| Market Maker | Liquidity providers quoting both bid and ask. Platform default everywhere. |
| Firm | Proprietary desks at broker-dealers trading the firm's own account. |
| Broker Dealer | Firms executing for clients or their own account. |
| Customer | Retail and institutional orders placed through brokers. |
| Pro Customer | Professional customers meeting volume or asset thresholds. |
Default & multi-select
Multiple participants can be selected at once. Default is Market Maker, as it is most informative for understanding hedging flows and market structure.
| SPX | Market Maker only |
| VIX | Market Maker + Broker Dealer + Firm |
Dan's participant recipe
From the July 2026 onboarding sessions: “The most correlative path of actual market movement is just using market maker for the S&P, and for VIX, we're going to actually use all three: market maker, broker dealer, and firm, because a good chunk of the inventory actually is held by firms, large firms with deep balance sheets.” For S&P, market maker entity types are “most active in the zero day contract… most active in regular trading hours and most correlated on a short time frame basis with market movement,” and he keeps Market Maker even when looking beyond zero day. Why Customer is not his view: “I don't want to cross wires there and show the opposite of that position.” In VIX the product is “often times… held and hedged by banks above market makers,” hence adding Broker Dealer and Firm back.
The four Greeks VS3D visualizes:
| Greek | What it measures |
|---|---|
| Delta | Sensitivity of option price to the underlying price. |
| Gamma | Rate of change of delta; indicates where hedging pressure concentrates. |
| Charm | Rate of change of delta over time (delta decay). |
| Vanna | Sensitivity of delta to changes in implied volatility. |
Delta Change (derived)
A fifth derived metric, Delta Change, was added to the Gradient Chart on May 31, 2026 (see 7.7).
Every view supports two data modes via a toggle at the bottom of the view.
Live Mode
Green indicator. Streams real-time data during market hours, updates automatically, and displays the timestamp of the most recent update.
Historical Mode
Pick a trading day with a date picker and navigate the session with timeline controls and a draggable scrubber to replay how positioning evolved. The scrubber's shaded silhouette is the day's activity profile, so you can find the busy windows fast. Replaying a big day at the moment before the move is the fastest VS3D training loop there is.
Replay as a Self-Check
Dan pushes members to use Historical mode to audit their own reads (#general-chat, Apr 26 2026): “you guys can always click on that lower left hand toggle on the position chart to switch between Live and Historical to verify what you thought you were seeing.”
The 4 PM Roll — and the Weekend Replay Rule
At the 4 PM ET close the front expiry settles and the tool rolls to the next session: the 0DTE scope moves to tomorrow's expiry. The 4–5 PM curb session can still adjust closing positions after the print. One replay gotcha follows from the roll: there is no Friday-night series re-open, so studying the expiring open interest on a weekend means jumping past Saturday entirely. Dan (#report-bugs-here, Jul 7 2026): “Since Friday night does not feature a series re-open, you would have to fast-forward to Sunday and choose 9PM Sunday if you are trying to mimic what I do when observing the expiring open interest positions.”
Update cadence: 10 minutes, always a snapshot of the past
“This is updating on a 10-minute cycle right now” — every 10 minutes VS3D gets a new positions file from the CBOE. The platform briefly ran 1-minute data but pulled it: “we actually had one-minute data, we just found that positions were becoming incorrect,” and the CBOE agreed it was “producing something that's not technically correct.” It will return once the CBOE corrects its specifications — “right now my interest is more in accuracy than guesswork” — and even then a 1-minute series “is always going to actually be showing you the past anyways because they're delayed by about 1 minute.” Gradients render in about 8 seconds on top of the CBOE-side delay: “it's always showing you a snapshot of the past. So you're always unavoidably behind.”
The navigation bar runs across the top and provides access to all views and settings:
| Menu | Contents |
|---|---|
| Home | Returns to a summary layout. |
| Dashboard | The customizable drag-and-drop workspace. |
| Position Reports (dropdown) | Positions by Strike, Positions by Expiration, Position Grid. |
| Greek Profiles (dropdown) | Gradient Chart, Simulation Grid. |
| Options (dropdown) | Option Prices, Greeks by Strike, Greeks by Expiration, Greek Grid. |
| Help | Documentation, Release Notes, Discord, About VolSignals. |
A notification bell (top right) provides system notifications about platform updates and data status. A user avatar menu (top right) contains the light/dark theme toggle and sign-out.
Controls shared across most views:
| Control | What it does |
|---|---|
| Product Selector | Toolbar dropdown to switch SPX/VIX; refreshes the view. |
| Current Price Display | Current or historical price, change from previous close as both absolute value and percentage, colored green/red for positive/negative. The same readout repeats in each panel header, so a full-screen panel still carries the tape. |
| Live/Historical Toggle | Bottom of each view; switches data modes. |
| Configuration Panel | Opened by a gear icon on the right; slides in from the right and holds settings specific to that view (participant filters, display options, strike grouping, color normalization, etc.). |
| Zoom Controls | Minus (−) zoom out, Plus (+) zoom in, Reset Zoom to default, Fit to View to auto-fit all data (fit-to-height recenters the price axis after you have zoomed around). Each panel zooms independently, and each panel offers a full-screen mode — the view used on the live calls when a single chart needs the whole monitor. |
Workspaces Keep Their Own Settings
Each workspace keeps its own configuration, so your Dashboard setup stays put while you explore other views. Dan's directions for navigating between the strike chart and the full book (#general-chat, Apr 29 2026): “Do you know how to show it? You can explore different expirations in Positions by Strike to see the long/short represented one at a time, or bucketed with multiple expirations. Or, you can click to Position Reports >> Position Grid to see a spreadsheet of all net positions by strike in expirations out 6 months.”
Not yet documented
The Options menu group (Option Prices, Greeks by Strike, Greeks by Expiration, Greek Grid) and the Simulation Grid under Greek Profiles appear in the navigation but do not yet have dedicated documentation pages from VolSignals. They exist in the product, but their settings and calculations are not yet documented.
Color normalization controls how heatmap values map to colors:
| Method | How it maps |
|---|---|
| Linear (Min/Max) | Maps the full value range linearly from minimum to maximum. |
| Percentile Range | Maps values by percentile rank to reduce outlier impact; configurable lower/upper percentiles, default 5th to 95th. |
| Standard Deviation | Maps values by distance from the mean in standard deviations. |
| Z-Score | Like standard deviation but centered on zero. |
| Manual Range | Specify exact min/max values for the color scale. |
Dan's own gradient settings
Dan runs Manual Range, linear and symmetric around zero: “I like 250 around 0 for gamma as my linear min-max, and I like 100 around 0 for charm, and usually with Vanna, I'm using either 1500 or 2500.” Why manual? “It benchmarks what I'm used to… I just want to anchor to an exposure that I understand as being meaningful.” Keep it symmetric — with linear settings “you might get, like, an asymmetric flip, or it might not reflect the zero.” He also streams on the Protanopia colorblind theme (the blue-orange gradient): “Just make sure that you check your own color scheme.” On the power exponent: set very low it “cartoonifies” the chart — a sharp boundary, but you lose the evolution of the gradients.
July 2026 refinement: Dan later gave a lower vanna number and stressed that vanna normalization is personal (#faq, Jul 28 2026): “for Vanna I recommend using the various options to normalize and find a fit for you. For exposure max/min manual I use 1k, but you can see right now that it's quite large.” The earlier 1500–2500 range and the 1,000 setting are both his; vanna exposures swing with the vol regime, so recalibrate when the regime changes, not day to day.
Keyboard shortcuts (Historical mode):
| Home | Jump to the start of the session. |
| End | Jump to the end of the session. |
| Left Arrow | Step to the previous time interval. |
| Right Arrow | Step to the next time interval. |
URL state persistence
VS3D saves view configuration — selected product, zoom level, participant filters, dashboard layout — in the URL. A configuration can be bookmarked, shared with a colleague to reproduce exactly what you see, and navigated via browser back/forward.
Positions by Strike — horizontal bar chart of total options position size (calls + puts) at each strike. Bars extend right for positive, left for negative; the vertical axis lists strikes; a reference line marks current underlying price. Each bar is analogous to net gamma exposure at that level.
| Area | Settings |
|---|---|
| Toolbar | View Mode Toggle — Position (standard bars) or Candlestick (OHLC-style boxplots of the range of position values over the day at each strike); plus Product Selector. |
| Config panel | Participants (default Market Maker); Expirations — All, DTE (filter by a days-to-expiration range), or Custom (pick specific dates); Display Options — Total (net calls + puts), Calls only, Puts only; Comparison Dots — Show Previous (−10 min) and Show Comparison (vs Market Open or a custom timestamp); Price Indicators — Show Straddle Bounds (horizontal lines at expected-move boundaries from the ATM straddle price; 1× and optional 0.5× sets); Strike Grouping — Show All Strikes or group by 5, 10, 25, or 50-point intervals; Bar Alignment — how bars anchor to the axis (center align by default; cosmetic — it changes the drawing, not the data). |
Panel Details from the August 2026 Annotated Guide
The front-expiry button: the middle Expirations button tracks the front expiry and labels itself by its days-to-expiry — 0 DTE during the week, 3 DTE on a Friday evening when Monday is next. Under Custom, checking tomorrow's expiry lets you preview the next session's book on this chart. Total can hide a pair: a net-flat strike can conceal a large call position offset against a large put position — switch Display Options to Calls and Puts before dismissing a line. The price line works overnight: outside regular hours the white-dash price line is an SPX estimate derived from futures, so you can read the book against the overnight tape. The book profile minimap: a compressed silhouette of the whole strike range with your viewport marked — drag it to jump, and use it as a quick check that the structure you are staring at is actually the biggest thing on the book.
Reading the dots — a default Positions by Strike view can show three markers on any strike axis, refreshed on the 10-minute CBOE cycle:
| Marker | What it is |
|---|---|
| Bar | Current position. “Same convention: left is short. Right is long and these are combined calls and puts every single level.” |
| White dot | “The position at the last update” — a ghost of 10 minutes ago that snaps to the end of the bar on the next update. “A big divergence between the current position or the bar and the white dot, that is something that is just traded in the last 10 minute interval.” |
| Blue dot | The comparison reference, default market open. “The blue dot is your reference point. You can make the comparison anything you want. You can make it Christmas if you want.” |
Reading the gaps: “all these bars that are filling left of these blue dots are telling you that this is intraday trading,” and “if what's current is to the left of the blue dot, that's customer buying, market makers getting shorter.” The reverse read: “If we're moving to the right between the dot and the bar, that means the market maker's getting more long. Customers must be selling back calls.”
The Dot Rule, All Four Cases
The August 2026 annotated guide dedicates a full diagram page to the technical rule. On the number line: blue dot to the right of the bar tip = the participant sold that strike since the comparison update; blue dot to the left of the tip, or inside the bar = the participant bought. Drawn out per case:
| Bar | Dot position | Read |
|---|---|---|
| Long bar | Beyond the tip (right) | Position was bigger at the reference — net sold since the update |
| Long bar | Inside the bar | Position has grown — net bought since the update |
| Short bar | Inside the bar (right of the tip) | The short has been extended — net sold since the update |
| Short bar | Beyond the tip (left) | The short was bigger at the reference — net bought back since the update |
Short bars read the same way as longs on the number line: dot right of the tip = sold (the short grew), dot left of the tip = bought back.
Dan's comparison anchor: prior day 9 p.m. ET
Dan re-anchors the blue dot away from market open: “I use a custom position that's built to reflect what I consider to be the expiring open interest… the position that's expiring today that was already there going into the trading day… More stable influence to trace throughout the day.” In practice that is the day prior at 9 p.m. ET, “because there are errors and reconciliations that get sent once the series opens again at like 8:15” p.m., so 9 p.m. captures the corrected book. It also explains mismatches with his stream: “if you're looking at my gradient and wondering why my position shows something different than you, it's often going to come down to this… I use just 9 p.m. as maybe a lazy thing.” The timestamps at the bottom of the view show EDT or CST — “just make sure you're aligned.”
July 2026 refinement (#general-chat, Jul 9 2026): “Correct- for the blue dots I use t-1 9pm et, which is not ultra precise (could probably use 8:20 pm et more accurately)- but the point is that it captures any reconciliations done on clearing after the 5pm et close.” Either timestamp works; the requirement is being after the series reopen so the clearing reconciliations are in the book.
Display habits: bucketing, scaling & straddle lines
Bucketing: on zero day Dan leaves strikes unbucketed — “I want to see the locality” — but buckets longer-dated positions by 10: “I do this all the time with longer dated positions… you kind of take the noise out.” Scaling: “Remember these render dynamically… it's always good to check the actual quantity” — 2,600- and 2,200-lot bars can look tiny simply because they are “dwarfed right now by positions that are like 9,000.” Straddle lines: the bounds are “just the last minute update. It'll change every 10 minutes or so,” and for the live number you “can also just use… exclamation point S in the Discord to get the absolute current straddle price.”
Candlestick View: the Same Book, Plus Time
Switching View Mode to Candlestick shows where each strike's position has traveled during the session, in three layers per strike: the thick body spans the change between the comparison time and now, the thin whiskers mark the intraday minimum and maximum the position has reached, and the vertical hash marks the current position. One glance tells you whether a line has been steadily built, unwound, or churned. Two reads worth keeping: a long whisker with a small body is a strike that traded heavily but ended near where it started; a hash sitting at a whisker extreme is one-way positioning still in progress. The sidebar is the same as the Position view minus the dot controls (the candles replace them); all other filters carry over.
Positions by Expiration — bar chart aggregating total options position size (calls + puts) by expiration date (the term structure). Each bar = aggregate across all strikes for one expiration; green = net positive, red = net negative; the horizontal axis lists expirations chronologically.
| Area | Settings |
|---|---|
| Toolbar | Product Selector. |
| Config panel | Participant Filter (default Market Maker). |
| Interaction | Hover any bar for a tooltip with exact position value and expiration date. |
Dan on the expiration view: his least-used report
“There's a reason I don't cover this much, because I don't find it as useful… I want to know the contract distribution. I want to know where it lives, because guess what? If somebody bought a million 100 strike puts, I don't care.” The netting hides information too: “If a market maker had long 10,000 at the money straddles and short 50,000 zero bid, no bid puts, 7,000 points out of the money, it would still show up as short 30,000 options… that's not a lot of information.” His advice: “We don't really know what these positions are, where they are in strike space. You want to drill down a bit.”
His Discord version concedes one use (#general-chat, May 7 2026): “the position by expiration chart is not granular enough imo to get any real actionable signal from- it's a representation of net contracts long or short, per maturity. But you don't know where those nets exist in strike/delta; which makes it less navigable- perhaps it's an interesting way to identify 'shifts' in market character or areas on the curve where options may skew cheap vs rich.” Treat it as a map of which maturities carry the size — usually the monthly opex dates and the big quarterly cycles — then drill into them on the Position Grid.
AM and PM Series Are Listed Separately
The maturity axis lists AM and PM series as separate entries. AM entries are the morning-settled series: their settlement prints on that day's opening auction (the SOQ on monthly opex). PM series settle on the 4 PM close. The AM series are the ones that matter at the open on opex mornings — and, per 3.6, the ones to keep out of your PM pin analysis.
Position Grid — 2D heatmap with strikes on rows and expiration dates on columns, showing total options position size (calls + puts) per cell. Green = positive, red = negative, intensity = magnitude; a dashed horizontal line marks the current underlying price.
| Area | Settings |
|---|---|
| Toolbar | Product Selector; Zoom Controls (Minus/Plus, Center and Reset Zoom to snap back to current price, Fit to View). |
| Config panel | Participant Filter (default Market Maker); Strike Bucketing (Show All Strikes, or 5/10/25/50-point intervals); Expiration Bucketing (None, or group by Day/Week/Month/Quarter/Year); Expiration Date Format (MM-DD e.g. 03-21; YY-MM-DD e.g. 26-03-21; or Days to Expiration e.g. 27d). Color Normalization (see 7.5) applies. |
The Straddle Row & the Stepped Boundary Cone
Two grid features the August 2026 annotated guide documents in full. The straddle row: each expiration column carries that expiry's at-the-money straddle price underneath the date — the term structure of expected moves, printed right on the grid. Compare a position's distance from spot against its column straddle to judge how alive it still is. Stepped straddle boundaries: the stepped dashed lines are the straddle boundaries drawn per expiration — spot plus and minus that column's straddle. Each column has its own tenor, so the boundary steps wider as you move out the curve, tracing the expected-move cone across the whole grid. Same idea as the dashed lines on Positions by Strike, repeated for every tenor at once; positions inside the boundary for their column are the ones the market is actually pricing a visit to. Toggle them under Display Options (1× and 0.5×). Note the straddle overlay is unavailable while Expiration Bucketing is active — a straddle belongs to a single expiry.
Reading the Grid — and Getting the Data Out
The 0DTE Positions by Strike chart is a single column of this grid, drawn as bars — the grid is where you find tomorrow's book today: pick the column, read the rows. Zoom out to find the structure (50-point buckets make far-OTM call blocks jump out; weekly bucketing rolls the book up by opex week, Monday start), then tighten the buckets to find the exact lines. August 2026 update: Export CSV is now live on the grid as a Pro-tier feature — the raw book by strike and expiry. If you're building your own GEX sheet, start from this export instead of reconstructing the book from OI. (Section 7.9's in-development table recorded it as admin-only during the July sessions; the annotated guide now shows it shipped.)
The signature visualization. Overlays OHLC candlesticks on a continuous colored gradient background, where each pixel's color and intensity represents a chosen Greek's exposure at that price level and point in time. Stronger colors = larger absolute values; color scheme fully customizable.
Greek Selector dropdown:
| Greek | What the gradient shows |
|---|---|
| Gamma | Net gamma exposure (positive = dealers trade against the market to hedge, a suppressive force; negative = they trade with the market, an amplifying force). |
| Delta | Net delta exposure. |
| Charm | Rate of delta change over time. In the default coloring, positive charm uses a RED gradient (dealers will need to sell as time passes) and negative charm uses GREEN (they will need to buy as time passes); colors reflect hedging effect, not the raw sign of charm. |
| Vanna | Delta sensitivity to implied-vol changes. |
| Delta Change (added May 31, 2026) | The difference between current position delta and the calculated position delta at future points in time and price. Assuming dealers are always hedged, this is how much delta they'd need to hedge moving from now to a simulated future time/price. Often reveals the path of least resistance; effectively combines gamma and charm into a single view. |
In the June 2026 sessions Dan walked through the two delta panels himself, with caveats the table above does not carry:
Delta — the whole book
“This thing you're seeing here is literally just the entire option delta of the whole market maker portfolio” — the entire SPX complex, not just zero day. Example: “if the exposure in Delta is short 11,559, the amount of minis held against this entire thing should be around 23,200. Just that's the 2x multiplier and the offset.” But: “What I would caution you against is becoming overly anchored to this idea that market makers are long that many minis, they're going to have to sell those, because it's not exactly true.” Locked combo trades “create a lot of delta… but it's not going anywhere. And most importantly, it's not decaying, it's not changing.” Note the Delta tooltip shows Price, Exposure, and Dollar Value of Trade but no Hedge Product to Trade — delta is the position itself, not a flow triggered by a move. And read it against the gamma surface: big delta with flat gamma reads very differently from small delta with violent gamma.
Delta Change — a mind trick
“Delta change literally says, this is your delta change over the next interval, so it's a step change 5 minutes forward, and plus or minus a dollar up or down… gamma's conditional. And this resets that after a move.” So price appears to trace the black zero line — “as if that line is some magic bullet. But it's not. It's just reflecting that no change is where you have no delta change… I almost want to take it out because people will be deceived by this.” It is a state read: “Red above green is long gamma… green above red, technically, that is a shorter gamma position.” And candidly: “I don't use delta change. Maybe you guys will find value in it.” The annotated guide adds one constructive read: the black corridor is where the delta difference vs the current state is near zero — paths the book can absorb without meaningful re-hedging — so its width is a visual read on how much room price has before dealer re-hedging kicks in, and a narrowing corridor into the close is a tell that hedging bands are tightening.
Map your colors to Dan's blue/orange commentary
Dan streams on the colorblind blue-orange scheme, so his charm commentary reads differently from the default green/red: “Make sure your color exposures are mapping correctly. For me, blue above orange means positive charm exposure, has to be offset with selling. Orange is negative, has to be offset with buying.” The seam is the read: “a pinning influence should always be represented by blue over orange… because you need to have selling above buying to balance, right? If you have buying above selling, that's going to imply like a split. You're going to run away from that level.”
Futures Coloring Caveat
Some charm maps flip Dan's scheme to show the end result for futures (what the dealer will do): positive charm = dealers sell = orange (sell pressure); negative charm = dealers buy = blue (buying). On that convention a pin reads orange over blue — think about it the other way. The flip applies to charm only: gamma keeps long = blue, short = orange on both schemes.
Config panel:
| Group | Options |
|---|---|
| Participant Filter | Default Market Maker. |
| Volatility Controls | Vol Adjust: 0% (current implied vol, default) and Vol Adjust: +1% (shift implied vol up one point to see how the landscape changes). Per the August 2026 annotated guide, the what-if control re-renders the surface under a parallel implied-vol shift of 1% up or down — useful ahead of events to preview how the exposure map changes if vol comes in or blows out. |
| Display Options | Background Color (Default dark / White / Black); Show Price Line; Show Contour Lines (boundaries between positive/negative regions plus ridge lines tracing peaks and troughs); Show Grid Lines. If a chart looks bare, check here first — someone probably toggled an overlay off. |
| Gradient Colors | Green/Red (default), Blue/Yellow, or Custom; plus Reverse +/− assignment toggle. |
| Color Intensity | Square Root (Boost Low) (emphasize subtle values); Power Law (Custom) (configurable via a power-exponent slider); Arcsinh (compress extremes while preserving mid-range detail). Exponent below 1 boosts the faint zones; above 1 makes only the big exposures glow. |
| RTH Toggle | Restricts the time axis to regular trading hours; toggle it off to include the extended session on the surface. |
Hover tooltip fields (crosshair on any gradient cell) — from Dan's July 2026 gamma session:
| Field | What it means |
|---|---|
| Exposure | “Your [Black-Scholes] model output for gamma. That's in S&P units.” |
| Dollar per percent | “Your notional gamma. That's like how much equivalent of the underlying you'd have to have to hedge a 1% move.” |
| Hedge product to trade | The field Dan favors: “a hedge product to trade of 338 literally just says for every dollar up, market makers are expected to sell 338 minis. Every dollar down would be the opposite. They're expected to buy.” |
| Dollar value of trade | The same reading translated into notional — the dollar size of the futures trade the node implies. |
Colors Are for Scanning; Decisions Come From the Numbers
Dan's standing instruction (#general-chat, Jun 18 2026): “regardless of your gradient color settings- you're encouraged to always spot-check the actual exposure & Hedge Product to Trade quantities.” And his canonical walk-through of the sign convention (#general-chat, May 7 2026): “Gamma exposure should be read this way: IF the index moves higher by $1.00 market makers have [hedge product to trade] to buy/sell. When the hedge product to trade is negative for Gamma, this is telling us that Market Makers have futures to sell if the market rallies >> this is positive gamma. Gamma exposure and its hedge is a non-directional measure… it either absorbs liquidity (positive gamma) or takes liquidity/trades with the direction (negative gamma).” Negative hedge product on Gamma = futures to sell on a rally = positive gamma. Check the number, not just the hue.
Conditional, not directional
A negative tooltip number “is not about selling. Market makers aren't selling because we're going down. This is all conditional. This is if market up one, where is their trade? So, this is balancing.” The same discipline applies to the gradient itself: “this is a simulation saying if the market is here at this time, but the market's not here right now, and so it's not always hyper realistic to think, well, just because we're in the yellow means we're going to go here.”
Reading the contour lines: dotted flips, solid max/min
“These dotted lines just denote flips or inflections. It's literally just where do you cross the zero bound approximately?” The solid squiggly lines “are just max and min… a max positive line is gonna look red, that's gonna imply the most selling in this range. Passively.” On gamma Dan thinks of them “in terms of max short gamma or max long gamma” — “either the most unstable or the most stable area.” The range is local: “if you thread your cursor across the gradient, you're going to see more maxes and mins.” Broken or partial lines mean the local position is too small to define an extreme — “The individual ingredients can't be tasted yet.”
Dan's compressed Discord version of the same rule (#general-chat, Jul 7 2026): “dotted lines = inflections across a boundary (typically 0.. represent areas where the greek changes from positive to negative/vice versa) / solid lines = local max and min for the greek.” The line colors follow your gradient scheme: on green/red, red traces the local max and cyan the local min; on blue/yellow, orange is the max and blue the min. Usage read from the annotated guide: while price holds inside the straddle boundaries, the positive max line is the balance read — the level the tape works back toward — and a red (negative-gamma) pocket just beyond a straddle boundary is the classic acceleration setup. The flip level drifting through the afternoon is normal; it moves as the book decays.
The gradient sees the whole book — scroll it
“This positions by strike is going to show you the zero day position by itself. This gamma gradient includes everything in the book… So you have a full view of the entire market maker book” — including longer-dated and flex positions months out. Two scroll habits follow. First: “You can always scroll over to the right hand side of your chart and get a good idea for what the actual gamma position is from the zero day” — the zero-day sign dominates at the right edge. Second: “when you see big changes as you scroll across time, be prepared for the market to actually change character as the day wears on.” A tool to show “is this gamma coming from zero day or behind” is in development.
The whole-book rendering is a hard constraint, not a preference (#general-chat, Apr 29 2026): “You cannot build custom expiration configs for rendering the gradients however- they will always render 'everything in the SPX'.” Expiration filtering lives on the position views only.
A drag-and-drop grid workspace where multiple view widgets sit side by side, each embedding a full, independent VS3D view with its own product, configuration, and live/historical state. Default layout: Positions by Strike (top left), Position Grid (bottom left), Gradient View (bottom).
| Control | Action |
|---|---|
| Lock icon | Toggles Unlocked (drag widgets by title bar, resize; drag handles at top) vs Locked (fixed, prevents accidental moves). |
| Add View | Adds a widget; offers Position Grid, Positions by Strike, Positions by Expiration, Gradient View, Simulation Grid. New widgets appear at the bottom. |
| Reset | Removes all widgets for a blank slate. |
| Move / resize | Drag the title bar to move (others rearrange automatically); resize by dragging edges/corners on a 12-column snapping grid; remove via the × in the title bar. |
Layout is saved in the URL and persists across refreshes.
Hard limit: 20 widgets
There is a maximum of 20 widgets per dashboard; Add View disables at the limit. Each widget loads its own data stream, so many widgets can degrade performance.
Documented calculations:
| Item | Calculation |
|---|---|
| Straddle Bounds / expected move | Calculated from the ATM straddle price (Positions by Strike). |
| Percentile normalization | Defaults to the 5th-to-95th percentile range to reduce outlier impact. |
| Delta Change (Greek) | (current position delta) − (calculated position delta at simulated future time/price coordinates), under the assumption that market makers are continuously hedged. |
| Dashboard grid | Uses a 12-column grid for widget snapping/resizing. |
| Charm exposure basis | Five-minute windows: “for every five minute sequence at any given point in the crosshair… how does their delta change in the next 5-minute window.” |
| Delta Change step | “The default is given a five minute move or a $1 step.” |
| Hedge product to trade | “Should usually be exposure times −2, just to account for the offset and the multiplier: ES multiplier of 50 versus the SPX multiplier of 100, and then the negative sign implies the offset.” |
| Vanna exposure convention | “If I raise Vol just 1% across the board, what happens to my delta?” — a parallel +1% shift; “The exposure is always going to be SPX units.” |
| Gradient calculation window | “We have a 2.5% plus or minus spot” — values are computed within spot ±2.5%. |
What an exposure number means — worked example
“The exposure is what's happening to the market maker's option delta given the change associated with the Greek that you're looking at.” Worked charm example: “If we're looking at the 11:13 a.m. time stamp with an exposure of 9.6, what that's saying is the option book between 11:13 and 11:18 should decay in such a way where it gets longer delta by about 960 cash delta” (the model output is in SPX units; the SPX multiplier of 100 converts it to cash delta). The sign lesson: “If they were flat delta, now they're long 960 delta… they want to delta hedge, and so they sell futures against this delta change. That's where you go from an exposure that's positive but actually an outcome that's push.” Applying Dan's ×−2 rule: exposure 9.6 → sell roughly 19 ES minis.
Reconciliation notes — where this UI reference differs from the strategy framing in Chapters 1–5. Nothing in those chapters is removed; these simply flag what to confirm against the live product.
Bar colors: blue/yellow vs green/red
Chapter 1 describes Positions by Strike bars as blue (long) / yellow (short), while the current official docs describe green (positive) / red (negative). Confirm which is live; the color scheme may have changed.
Resolved in the June 2026 Q&A: blue/yellow confirmed
Dan read an attendee's written summary of the conventions aloud on air and confirmed each line: “On your positions by strike, blue is market maker long, yellow is market maker short. Correct. On your charm gradient, blue is positive charm, passive selling pressure, heading into expiration. That's correct.” The Chapter 1 framing (blue = long / yellow = short) matches the live product on Dan's theme.
Reconfirmed, Aug 2026: the official annotated guide states it directly — bar colors follow the color scheme setting. Default: green long / red short. Protanopia-friendly palette (Dan's stream, and this guide's convention): blue long / gold short. Both descriptions were always correct; they describe different themes.
“Gamma Chart” vs “Gradient Chart”
Chapter 1 references a “Gamma Chart” right panel and explains the deliberate absence of a “gamma by strike” chart. The official docs frame the equivalent capability as the Gradient Chart. Same underlying idea, described from a strategy angle (guide) vs a UI-reference angle (docs).
In development — features Dan described as coming during the June–July 2026 sessions:
| Feature | Dan's description |
|---|---|
| Zero-day vs back-book split | “Tools to differentiate that for you so we can show you, well, is this gamma coming from zero day or behind. I can do that myself now with the data, but we want to productize it.” |
| Anchored morning profile | “A profile that's specifically just anchoring the morning position, the expiring open interest, keeping it there for you and just updating the walls on it… or you can show a differential.” |
| Intraday flow overlay | Customer supply/demand on top of the hedge picture, “in a way that gives the right signal without obfuscating the hedge signal.” |
| ES futures volume | “Integrating ES futures volume into our profile. That will give us literal quantification of… really active flow… when volume is in excess of the norm.” |
| Simulation-forward profiles | “Profiles that will model this in a way that's realistic, to show you guys the progression over time as a simulation forward.” |
| Vanna range expansion | “Vanna needs a wider range… probably expand this one to be something like 10% around spot… and also maybe out a month.” |
| Market-influence dashboards | “Dashboard views that tease out more useful information… not necessarily by strike but more by how it actually lands with market influence.” |
| CSV export | Admin-only today: “We're going to probably just open up the CSV export… you can just take a screenshot of it and plug it into Claude or Google, whatever, it'll just give it to you anyways.” Shipped, Aug 2026: live as a Pro-tier Export CSV on the Position Grid (see 7.6). |
| 1-minute positions | “When the CBOE has reliable one minute positions, we'll have that as well.” |
| ES prices / basis | “For ES, we'll probably do that soon… what the basis is, we'll have that there, I guess, kind of implicitly, too.” (Licensing-dependent.) |
No API, by design
“We don't outsource our modeling and we build positions in ways maybe that not everybody does… I don't want to be something that [SpotGamma] plugs in because we taught them how to do it.” For history, you tabulate manually: “work your way through the different timestamps and see exactly what happened… It's not like there's an API where you can actually comb through or ingest the data.”