High Vol Level

High Vol Level: The High Volatility Level or HVL is a transition zone that signals a shift in the gamma regime—from a positive to a negative environment, or vice versa. It’s derived from the inflection point in the slope of thegamma exposure curve.

Here’s what it means:

• Above HVL we are moving in a positive gamma regime. Dealers hedge against price movement, which helps stabilize price action.
• Below HVL we are moving in a negative gamma regime. Dealers hedge with price movement, amplifying volatility.

Why it matters:

• If the price is above HVL, you’re more likely in a mean-reverting environment.
• If the price is below HVL, you’re in a momentum-driven, breakout-prone market.

Traders can use HVL to:

• Adapt their strategy (fade vs. breakout)
• Gauge if flow will stabilize or accelerate price
• Anchor risk based on flow dynamics

Think of HVL as a market mood indicator. It doesn’t just tell you where price may react—it tells you how price is likely to behave in the current gamma regime.

We have created a video tutorial to show how to use the High Vol Level for your trading.

Positive and Negative Gamma

When we look at the HVL Level we need to understand the concept of Positive and Negative Gamma. We created a dedicated guide on this topic.

The gamma of an option can be positive or negative, depending on whether you’re long or short the option.

• If you are long an option—whether it’s a call or a put—your gamma is positive.
• If you are short an option, your gamma is negative.

Market Makers hedge different in a positive gamma regime versus a negative gamma one.

• In a positive gamma environment, the market is net long options—meaning more options have been bought than sold. They hedge by buying when the market drops and selling when it rises. This keeps them delta neutral, and their hedging flow acts as a dampener on price volatility. The result? Intraday volatility is lower.
• In a negative gamma environment, the market is net short options—more options have been sold than bought. In this case, market makers hedge by doing the opposite: Selling futures when price drops and Buying futures when price rises. This means their hedging amplifies moves instead of softening them. The result? More volatility. Faster moves. Bigger swings.

Knowing whether the market is in positive or negative gamma is like knowing the mood and sentiment of the market before it moves.

How to trade the High Vol Level (HVL)

Now let’s look at how to trade the HVL. We will look at two scenarios: the pinning effect and the breakdown of HVL.

Pinning Effect and Bounce around the HVL

In this scenario price trades above HVL with positive gamma regime. When price trades above HVL, the gamma regime is positive.

Dealers are long gamma, which means their delta exposure changes slowly. As a result, they hedge against price movement—selling as price rises and buying as price falls.

This creates a dampening effect on price movement, leading to a more stable, mean-reverting environment. In this setup, HVL acts as a gravitational center where price tends to pin, especially during low news cycles or near expiration. Traders can expect chop and short-term reversals around HVL as a result of dealer hedging flow.

Flow Dynamics:

• As price rises → dealers sell to hedge
• As price drops → dealers buy to hedge
• This results in a magnetic effect near HVL where price oscillates but fails to break away cleanly

You’ll often see choppy intraday action. Breakouts fizzle. Dips bounce quickly. It’s frustrating if you’re trading momentum—but ideal for fading extremes.

Breakdown of HVL

Now let’s look at the second scenario: the Breakdown of the HVL. Price is below HVL in negative gamma zone

Why it Happens:

Below HVL, gamma flips negative. Now dealers are short gamma. This changes how dealers behave—they hedge with price movement. When price falls, they sell more; when price rises, they buy more. 

This behavior creates a feedback loop that amplifies volatility instead of suppressing it. As a result, HVL becomes a launchpad for directional moves rather than a pinning zone. When the price is below HVL, traders should expect momentum and trend-following setups to dominate.

• Dealers hedge with price – fueling volatility
• Breakouts and directional moves are more likely

That means:

• If price drops = they sell more
• If price rises = they buy more

This creates a feedback loop where dealer hedging amplifies volatility instead of suppressing it. Price no longer oscillates—it breaks away from HVL, often aggressively.

This is when you’ll see:

• Momentum days
• Clean breakouts or breakdowns
• Failed retests of HVL acting as new resistance/support

Key Concepts on how to use the HVL

HVL isn’t just a level—it’s your regime compass. It helps you choose the right type of trade for the current environment.

Want to learn more about our Gamma Levels?

• Access the Gamma Levels Course in the Academy