Most option trades have a market maker, called a dealer, on one side, and dealers hedge. Module 5 showed the effect: a long gamma book sells rallies and buys dips, a short gamma book chases the move. Nobody publishes the dealer book, so this lesson shows how the Terminal estimates its gamma exposure, what the key levels mean, and where the estimate goes blind.
From open interest to dealer gamma
The raw material is open interest, the number of contracts still open at each strike, counted after every close. It says how many contracts exist, not who holds which side, so the Terminal adds the assumption most dealer gamma models use: customers buy puts for protection and sell calls against stock they own, which leaves dealers long the calls and short the puts. Every call adds gamma to the dealer book; every put takes it away.
Each strike gets a size: gamma times open interest times 100, the shares the hedge trades for a $1 move. Say a stock is at $202 and 10,000 calls are open at the $210 strike, each with a gamma of 0.02. That is 0.02 x 10,000 x 100 = 20,000 shares per $1. A 1% move is about $2, so about 40,000 shares, roughly $8.2 million of stock. The Terminal quotes GEX in that unit, dollars of hedging per 1% move, with puts counted as negative.
Four levels from one table
Net the calls against the puts at each strike and you get the bars Greeks Exposure draws. The biggest concentrations on each side are often called gamma walls. A made-up book for that $202 stock, in millions of dollars per 1% move:
| Strike | Call gamma | Put gamma | Net | Running total |
|---|---|---|---|---|
| $180 | 0.5 | 4.5 | -4.0 | -4.0 |
| $190 | 1.0 | 7.0 | -6.0 | -10.0 |
| $200 | 14.0 | 2.0 | +12.0 | +2.0 |
| $210 | 8.2 | 1.0 | +7.2 | +9.2 |
| $220 | 5.5 | 0.5 | +5.0 | +14.2 |
- Call Wall, the most call gamma at or above the stock: $210. Dealers are long that gamma, so their hedging sells as the stock rises into it, and rallies often slow there.
- Put Wall, the most put gamma at or below the stock: $190. Dealers are assumed short those puts, so they are short gamma there: as the stock falls toward it their hedge sells more stock, not less. A fall can still slow there, because when holders cash in that protection, dealers buy back stock they sold as a hedge. If the stock keeps going, short gamma takes over. A level to watch, not a floor.
- Gamma Flip: where the running total, summed from the lowest strike up, crosses zero. Here it goes from -10.0 at $190 to +2.0 at $200, so about $198. Above it the estimated book is long gamma and hedging damps moves; below it, short gamma, and hedging amplifies them. Some desks call the gamma flip the vol trigger.
- Key gamma, the largest net bar either way: $200, where the most hedging is concentrated.
So this book damps moves around $200 to $210 and amplifies a drop below $198, just 2% away. That asymmetry is what the levels are for.
Why a running total
The fuller way to find a flip is to reprice the whole book at every stock price and see where its gamma changes sign. The chart does that for a tiny dealer book on a $100 stock: long two $105 calls that customers sold, short three $95 puts that customers bought.
Long two $105 calls and short three $95 puts, with 30 and 7 days left. Gamma is negative below about $102 and positive above it at 30 days; with 7 days left the crossing tightens toward $100. Raise volatility and the crossing moves up, because the heavier put side spreads out. Switch to delta to see which way the hedge trades.
At 30 days and 30% volatility the book's gamma crosses zero near $102. Switch to delta: below the crossing the delta rises as the stock falls, so dealers sell into the drop. The running total is a shortcut that needs no reprice: it marks where put gamma below gives way to call gamma above.
Vanna and charm levels
Vanna and charm, from Module 5, move delta when implied volatility changes and when a day passes. The Terminal runs the same open interest sum for both. Vanna support is the strike with the largest positive net vanna: if implied volatility falls, dealer delta there shrinks and they buy stock, one way a calm market drifts up. Vanna resist is the largest negative net vanna, where the same fall makes them sell. Charm pressure is the largest net charm either way, where the hedge drifts most each quiet day, strongest into a big expiration.
Vanna is positive between the strikes: there a fall in implied volatility trims the book's delta and dealers buy stock to stay hedged. Switch to charm: it is negative in the same zone, so each quiet day trims the delta too, and with 7 days left the effect is several times larger.
What the estimate cannot know
- Which side dealers are on. The convention fits an index, where funds buy puts and write calls. Where customers pile into calls, dealers are short them and every call bar has the wrong sign.
- Today's trades. Open interest is counted overnight. Contracts opened or closed today, including same-day expirations traded within the session, are not in it.
- Hedges held elsewhere. A dealer may offset gamma with other options or futures. The model treats each contract as hedged on its own.
So every level marks where hedging is likely to be concentrated, not a price the stock must respect, and a wall 8% away matters less this week than one 1% away.
The maths: gamma exposure and the flip
For each strike and side, GEX = ±Γ × OI × 100 × S² / 100, plus for calls and minus for puts. Γ is gamma per share per $1, OI the open interest in contracts and S the stock price. Γ × OI × 100 is shares of hedge per $1; one S turns shares into dollars and S / 100 turns $1 into 1%. The $210 calls: 20,000 × 202 × 202 / 100 = 8,160,800, about $8.2 million.
The flip uses the running total C(K) = Σ net GEX at strikes up to K. Where C changes sign between strikes K₁ and K₂: flip = K₁ + (K₂ - K₁) × |C₁| / (|C₁| + |C₂|). In the table, 190 + 10 × 10 / 12 = $198.33. The Terminal skips crossings where the total is under 1% of its largest size, takes the one nearest the stock when several qualify, and shows a dash when the result sits implausibly far away.
Your turn
Read the open interest the estimate starts from on the free SPY chain. Then open Greeks Exposure on SPY with the All chip, read the Put Wall, and switch to the Cumulative view to see where the running total crosses zero. Finish with NVDA's Call Wall.