What is Gamma Exposure?¶
Gamma exposure (GEX) measures the total gamma held by options market makers across all strikes and expirations for a given underlying. When traders buy and sell options, market makers take the other side. To stay delta-neutral, they must continuously hedge their positions.
This hedging creates predictable, mechanical flows in the market.
Positive vs Negative Gamma¶
When aggregate dealer gamma is positive, market makers hedge against the trend:
- Price rises: dealers sell the underlying
- Price falls: dealers buy the underlying
This acts as a dampener, reducing volatility and keeping prices pinned near high-gamma strikes.
When aggregate dealer gamma is negative, the opposite happens:
- Price rises: dealers must buy more
- Price falls: dealers must sell more
This amplifies moves, leading to trending days with higher realized volatility.
Key Levels to Watch¶
| Level | Meaning |
|---|---|
| GEX Flip | The strike where dealer gamma transitions from positive to negative |
| Max Gamma | The strike with the highest absolute gamma concentration |
| Put Wall | Highest concentration of put gamma (acts as support) |
| Call Wall | Highest concentration of call gamma (acts as resistance) |
How to Use GEX in Your Trading¶
- Identify the regime: Are we in positive or negative gamma territory?
- Map key levels: Know where the GEX flip, put wall, and call wall sit
- Adjust your strategy: In positive gamma, mean reversion works well. In negative gamma, trend following tends to outperform.
- Watch for regime shifts: The transition from positive to negative gamma often precedes volatile moves
The Mechanical Advantage¶
Unlike most market analysis, gamma exposure is not about predicting direction. It is about understanding the mechanical constraints that options market makers operate under.
These are not forecasts. They are math.
When you understand the flows that must happen due to dealer hedging, you gain an edge that is fundamentally different from traditional technical or fundamental analysis.
Skavinski provides real-time gamma exposure data across all major indices and over 6,000 individual stocks. Explore the data on TeploMap.