Frequently Asked Questions

Gamma Exposure measures the rate of change in delta across all options at a given price level. In simpler terms, it quantifies how much dealers' hedging demand will change as the stock price moves. Think of it as a measure of how "sensitive" market makers are to price movements - high gamma exposure means even small price moves require significant hedging adjustments from dealers.

Gamma: Measures how much delta changes for a single option when price moves $1. It's a property of individual options.

Gamma Exposure (GEX): Aggregates gamma across ALL open options in the market at a specific strike price, showing the total hedging pressure from the entire options market. It's the "market-wide" view.

GEX creates "self-reinforcing" price movements through dealer hedging. When GEX is negative, small price movements force dealers to hedge by buying/selling more, amplifying the move. When GEX is positive, dealer hedging acts as a stabilizer, creating natural support/resistance levels. It's like a feedback loop - the hedging activity either dampens or amplifies price movements.

Positive GEX acts as a stabilizer and natural support/resistance. When price dips, dealers are forced to buy to hedge (supporting the price). When price rallies, dealers sell to hedge (capping upside). Green bars on our charts indicate positive GEX zones where you can expect price to "pin" or stabilize.

Negative GEX acts as an accelerator and amplifier. When price moves down, dealers sell to hedge (pushing it lower). When price moves up, dealers buy to hedge (pushing it higher). Red bars indicate negative GEX zones where price tends to be more volatile and trends can accelerate quickly.

Positive GEX creates natural support/resistance because dealer hedging activity naturally stabilizes price at those levels. Traders often see price "pin" or bounce at high positive GEX strike prices, similar to max pain levels. These aren't magic levels - they emerge from the mechanical hedging behavior of market makers.

Common strategies include:

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  Identify volatility zones: Negative GEX areas are where prices tend to move fast; positive GEX areas are where prices stabilize
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  Support/resistance identification: Look for high positive GEX levels as natural support
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  Risk assessment: Avoid holding positions through negative GEX zones without stops if you prefer stable conditions
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  Trend confirmation: Strong negative GEX aligned with trend direction suggests trending market
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  Mean reversion: High positive GEX often precedes mean reversion moves

No. GEX doesn't predict direction—it predicts the character of price movement (stable vs. volatile). A stock can trend up or down through negative GEX; it just means the trend will be more pronounced and less stable. Think of GEX as describing "how" price might move, not "where" it will go.

GEX works best for the current expiration cycle (days to weeks). It becomes less relevant as you look further out in time, as longer-dated options have less immediate impact on price dynamics. Focus on near-term expirations for the most actionable insights.

GEX works best as a complementary tool, not a standalone system. Combine it with:

• • Technical analysis (support/resistance, trends)
• • Fundamental analysis (earnings, news)
• • Implied volatility levels
• • Overall market direction and sentiment

GEX changes dynamically as:

• • Stock price moves (gamma exposure shifts to different strike prices)
• • Options open interest changes (new positions added/removed)
• • Time decays (closer to expiration = gamma concentrates)
• • Implied volatility fluctuates (affects dealer hedge ratios)

across all strikes at a price level. It's typically measured in dollar terms (notional exposure), giving you a sense of the total hedging pressure at each strike price.

Open Interest: Count of how many contracts exist at each strike

GEX: Dollar value of gamma exposure/hedging pressure at each strike

High open interest doesn't automatically mean high GEX; you need both concentration of contracts AND gamma (which is highest near-the-money and close to expiration).

• Green bars (positive GEX): Support/resistance zones; stabilizing areas
• Red bars (negative GEX): Accelerator zones; volatile areas where trends amplify
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  Bar height: Magnitude of gamma exposure at that strike

The best way to understand GEX is through practice and observation:

• • Watch how GEX levels correlate with actual price behavior over time
• • Compare GEX charts to realized volatility and trend direction
• • Paper trade using GEX as a secondary confirmation tool
• • Track how GEX changes as expiration approaches
• • Notice how earnings/news events shift GEX dynamics