In a positive-gamma regime, dealer hedging stabilizes: they sell strength and buy weakness, absorbing moves. Cross below the gamma flip into negative gamma and the hedging inverts — and that inversion can turn an ordinary dip into a spiral.
The mechanism
In negative gamma, to stay hedged, dealers must sell as price falls and buy as it rises. So a decline forces dealer selling, that selling pushes price lower, the lower price forces still more hedging selling, and so on. It's a reflexive loop: the hedging that's supposed to be neutral becomes an accelerant. The same loop works upward too, but selloffs feel sharper because fear and forced selling compound.
Negative-gamma selling isn't a view on the market — it's forced mechanics. That's exactly why it doesn't stop where a “normal” dip would.
Why it matters for you
This is why dealer positioning is worth reading before you fade anything. Below the flip, an “oversold” bounce you'd normally buy can be the exact spot the spiral runs you over, because the flow doesn't care that price looks stretched. Support levels hold less reliably; breaks extend further than they “should.”
What to do about it
When price is below the flip and net gamma is negative, stop fighting the trend — respect momentum, size down, widen stops, and expect extension (see how to trade a negative-gamma regime). The spiral ends when price reclaims the flip or dealers finish rebalancing, not when a chart looks oversold. Knowing which regime you're in is the difference between catching the bounce and being the fuel for the next leg down.