Net gamma exposure by strike. Positive GEX = dealers dampen moves (support). Negative = dealers amplify moves (volatility).
Running sum of net gamma by strike. Green = positive gamma zone (dealer dampening). Red = negative gamma zone (dealer amplifying). Yellow dot = gamma flip level.
What is Gamma Exposure (GEX)?
Gamma Exposure measures the total gamma positioning of market makers across all strikes. Positive GEX means dealers are short gamma and will hedge by buying dips and selling rallies (stabilizing). Negative GEX means dealers amplify moves. The Gamma Flip level marks where behavior switches.
How GEX Drives Market Behavior
Gamma Exposure (GEX) quantifies the total gamma positioning of market makers across all open options contracts. The per-option formula:
GEX = Gamma × Open Interest × 100 × Spot² × 0.01
Market makers are assumed to be long calls and short puts. Put GEX is multiplied by −1, so:
Net GEX = Σ(Call GEX) − Σ(Put GEX)
When total GEX is positive, dealers hedge by buying dips and selling rallies — dampening volatility and creating mean-reverting, range-bound behavior.
When total GEX is negative, dealers hedge in the same direction as price — amplifying moves and creating trend-following, momentum-driven behavior.
Key Levels: Call Wall, Put Wall, Vol Trigger
Call Wall — The strike with the highest call gamma exposure. Dealer hedging creates selling pressure at this level, acting as resistance. Price rallies often stall here.
Put Wall — The strike with the highest put gamma exposure. Dealer hedging creates buying pressure at this level, acting as support. Price dips often bounce here.
Vol Trigger (Gamma Flip) — The price level where cumulative net gamma crosses zero. Above this level, dealer hedging is stabilizing. Below, it becomes destabilizing. This is the key volatility threshold.
Key Gamma Strike — The strike with the highest absolute net gamma. Price tends to gravitate toward this level due to the concentration of dealer hedging activity.
Vanna and Charm: Hidden Market Movers
Vanna (dDelta/dVol) measures how delta changes with implied volatility. When VIX drops, positive vanna exposure forces dealers to buy stock to maintain hedges — creating a bullish tailwind. When VIX rises, the opposite occurs. Vanna flows are a major driver of systematic market moves.
Charm (dDelta/dTime) measures how delta changes as time passes. High charm exposure means significant daily delta adjustments from dealers, creating predictable hedging flows. Charm accelerates near expiration, contributing to pin risk at high-OI strikes.
Together, Vanna and Charm create the "hidden" flows that move markets beyond simple supply and demand. They explain why markets often rally into low-VIX environments and why OPEX weeks exhibit unusual price behavior.
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