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Composite positioning score -100 to +100
The Dealer Sentiment Index (DSI) is a composite score from -100 to +100 that quantifies the directional bias implied by dealer positioning. It combines multiple dimensions of dealer exposure into a single, interpretable number.
DSI is computed from three primary components, each capturing a different aspect of dealer positioning:
The sign and magnitude of net gamma exposure. Strongly positive gamma (dealers long gamma) contributes positively to DSI because it implies a stable, supportive market environment. Negative gamma contributes negatively because it implies fragility and directional vulnerability.
Vanna measures how dealer delta changes with implied volatility. When dealers have positive vanna exposure, a drop in IV causes them to buy shares (bullish flow). Negative vanna means IV drops cause selling. This component captures the volatility-driven flow direction.
Charm (delta decay) highlights end-of-day and end-of-week hedging-flow pressure. When dealers hold positions with positive charm, time decay can push them to sell. Negative charm can push them to buy. This component captures the time-driven flow estimate.
The DSI scale runs from -100 (maximally bearish dealer positioning) to +100 (maximally bullish dealer positioning):
| DSI Range | Interpretation | Typical Market Behavior |
|---|---|---|
| +50 to +100 | Strongly bullish | Dealers mechanically supporting price. Dips are bought. Low realized vol. |
| +20 to +50 | Moderately bullish | Positive dealer flows with some capacity for short-term pullbacks. |
| -20 to +20 | Neutral | Mixed positioning. No strong directional dealer flow. Event-driven. |
| -50 to -20 | Moderately bearish | Dealers leaning short. Rallies face selling pressure from hedging. |
| -100 to -50 | Strongly bearish | Dealers mechanically pressuring price lower. Rallies are sold. High realized vol. |
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