GEX (gamma exposure)

Starter draft. Rewrite in the group’s own voice.

What GEX measures

Market makers sell most of the options that traders buy, and they hedge that risk by trading the underlying index or futures. Gamma is how fast an option’s delta changes as price moves, so it tells you how much hedging a dealer has to do for each point the index moves. Gamma exposure (GEX) adds that up across every strike and expiry, using estimates of which side dealers are on.

The number matters because dealer hedging is large, mechanical, and predictable.

Positive and negative gamma

• Positive gamma: dealers are long options. To stay hedged they sell into rallies and buy into dips, which dampens moves. Expect ranges, mean reversion, and falling realized volatility.
• Negative gamma: dealers are short options. They have to buy as price rises and sell as it falls, which amplifies moves. Expect trends, gaps, and rising volatility.

The gamma flip

The gamma flip (also called zero gamma) is the price where net dealer gamma changes sign. Above it, hedging tends to calm the market; below it, hedging tends to push it further. The flip is often the most important level in a weekly outlook.

Call wall and put wall

• Call wall: the strike with the most call gamma. It often caps rallies, especially into expiry.
• Put wall: the strike with the most put gamma. It’s often the first real support in a selloff.

Limits

GEX is estimated from open interest, and nobody knows dealers’ real positions. It describes the backdrop, not the direction. It shifts after every expiry, and 0DTE options can change the intraday picture within hours. Use it alongside price structure, not instead of it.