Market makers and delta hedging

A market maker ("dealer" or "MM") earns a living on the spread between bid and ask, not on market direction. They therefore neutralize their directional risk constantly, largely with ES futures: this is delta hedging.

The dealer is the mirror image of the client

When a client buys an option, the dealer sells it to them, and vice versa. The dealer's position is therefore the opposite of the client flow.

Applied to the 3:29 pm print

The client sold 978 puts. The dealer is therefore long puts (last row of the table).

1. Immediate hedge: a put has a negative delta, so the dealer must buy ES to get back to zero. That is buying pressure at the time of the print.
2. Gamma effect: the dealer becomes long gamma around that strike. If price comes back to it, the hedge will make them buy the dips and sell the rallies, which stabilizes the zone.
3. Both effects point toward a floor around the strike, which is what the session showed (module 5).