Gamma Exposure (GEX)
Market maker hedging pressure and volatility regimes
Gamma Exposure (GEX) measures the aggregate gamma positioning of options market makers, predicting their hedging behavior and market volatility.
What is GEX?
Gamma Exposure (GEX) represents the dollar amount of stock market makers must buy or sell to remain delta-neutral when the underlying moves 1%.
Units: Measured in millions of dollars
Sign Convention:
- Positive GEX: Market makers are long gamma (short options to customers)
- Negative GEX: Market makers are short gamma (long options from customers)
GEX Regimes
| Regime | Dealer Behavior | Market Impact |
|---|---|---|
| Positive GEX | Sell rallies, buy dips | Suppressed volatility, mean reversion |
| Negative GEX | Buy rallies, sell dips | Amplified volatility, trending moves |
Key Levels
| Level | Description | Market Impact |
|---|---|---|
| Call Wall | Highest positive GEX strike above current price | Acts as resistance—MMs sell into rallies |
| Put Wall | Highest negative GEX strike below current price | Acts as support—MMs buy dips |
| Zero Gamma Level | Price where GEX flips from positive to negative | Critical inflection point—volatility regime change |
| Gamma Flip Strike | Alternative term for zero gamma level | Above = suppressed vol, Below = amplified vol |
Strength Factors:
- Larger GEX magnitude = stronger effect
- Closer to expiration = stronger effect (gamma peaks at expiration)
- Higher open interest = more persistent level
Reading the Chart
The GEX chart shows gamma exposure at each strike:
- Tall bars: Major hedging levels (price magnets)
- Zero crossing: Volatility regime change point
- Current price line: Reference for positioning
When GEX Matters Most
| Event | GEX Impact | Trading Implication |
|---|---|---|
| Options Expiration (OpEx) | Large GEX expires, regime can shift dramatically | Expect volatility changes post-expiration |
| Earnings | Individual stock GEX changes rapidly | Pre-earnings: high GEX, Post-earnings: GEX collapse |
| Fed Events | Index-level GEX positioning affects SPY/QQQ | Watch for gamma squeezes around FOMC |
| 0-2 DTE | Gamma effect strongest in final days | Pin effect most powerful |
| High IV Events | Gamma increases with volatility | GEX levels become more significant |
Time Decay: Gamma is highest ATM and peaks as expiration approaches. GEX analysis is most relevant for 0-30 DTE options.
Key Takeaways
- Positive GEX → expect range-bound, lower volatility
- Negative GEX → expect trending moves, higher volatility
- Walls act as price magnets and barriers
- Zero gamma level is a volatility trigger
- Combine with option walls and price action
Note: GEX shows current positioning, not predictions. Past GEX patterns may not repeat. Use alongside other analysis and always do your own research.
