Gamma Exposure (GEX)

In the last lesson we met the dealers — the people on the other side of your trades who must hedge to stay neutral. This lesson adds them all up. When you sum the hedging pressure across every option on a market at once, you get a single number that tells you which way that hedging will push. That number is gamma exposure, or GEX, and it is the core idea this whole terminal is built around.

By the end you'll be able to read one question off the screen: are the dealers, as a group, set up to calm the market down — or to speed it up?

A quick recap of gamma

Recall gamma from the Greeks lesson. Delta tells you how much an option's value moves when the underlying moves a little. Gamma tells you how fast that delta itself changes. It is the curve in the position.

Gamma matters to a dealer because of delta hedging. A dealer who wants no directional bet must keep buying or selling the underlying as the price moves, just to stay flat. The more gamma there is, the more often and more aggressively they have to do this. So gamma is really a measure of how much forced trading the dealers will have to do.

What "gamma exposure" actually sums up

Every strike on the board has options sitting at it, and the dealers are net long or net short the gamma at that strike. Gamma exposure (GEX) adds all of that up, with sign, into one figure for the whole market.

Think of it like this. Each strike is a little spring attached to the price. Some springs pull the price back toward where it was; others shove it further away. GEX is the net strength of all those springs combined, after the pulls and the pushes cancel out. The sign of the answer — positive or negative — is the single most important thing on the screen.

Positive GEX: the market self-corrects

When GEX is positive, the dealers are net long gamma. Long gamma means their hedging works against the move.

Walk through it slowly. The price drifts up. A long-gamma dealer's delta grows, so to stay neutral they must sell the underlying — selling into the rise. The price drifts down instead, their delta shrinks, so they buy — buying into the fall. In both directions the dealers lean the opposite way to the move.

The everyday picture is a bowl. Drop a marble anywhere in a bowl and it rolls back toward the bottom. Positive GEX is that bowl: every push away from the centre is met by hedging that nudges price back. Moves get damped, ranges stay tight, and price tends to hover — an effect traders call pinning, especially near big strikes.

Negative GEX: the market amplifies

When GEX is negative, the dealers are net short gamma — and now the hedging flips to work with the move.

Same walk-through, opposite signs. The price rises, a short-gamma dealer's delta goes more negative, so to stay neutral they must buy the underlying — buying into a rise that is already happening. The price falls, and they must sell into the fall. Now the dealers lean the same way as the move, adding fuel to it.

The everyday picture flips from a bowl to the top of a hill. A marble balanced on a dome rolls away faster the moment it starts moving. Negative GEX is that dome: small moves grow into bigger ones because the hedging chases them. Ranges widen, swings get sharper, and price tends to trend rather than hover.

The flip point

So the same dealers either calm the market or speed it up, and the only thing that decides which is the sign of GEX. The price level where GEX crosses from positive to negative is the gamma flip (also called the zero-gamma level). It is the line between the bowl and the dome.

The chart below shows the shape. The curve is total dealer gamma plotted against the price of the underlying. Where it sits above the zero line, the market is in the damping, mean-reverting regime; where it dips below, the market is in the amplifying, trending regime. The crossing point is the flip.

Hover the curve to read the regime at any spot. Where it crosses zero — the gamma flip — dealer hedging switches from leaning against moves to chasing them.

Start flat

Recall gamma from the Greeks lesson — the curvature of a position. On its own it is just a line on a chart.

Sum it up

Add the dealer gamma across every strike and you get one curve plotted against spot — the shape of gamma exposure.

Positive GEX

Above the line, dealers are long gamma: hedging leans against the move. Moves get damped — the market self-corrects, a bowl.

Negative GEX

Below the line, dealers are short gamma: hedging chases the move. Moves get amplified — the market accelerates, a dome.

The flip point

Where the curve crosses zero is the gamma flip — the threshold between the two regimes, and the level the terminal watches.

Why this single level gets so much attention: regimes don't change gradually here, they change at a threshold. On one side of the flip, hedging leans against moves; cross it, and the very same hedging starts leaning with them. A market sitting just above its flip is calm but fragile — a move through the flip can switch the whole character of trading at once.

Seeing it on the heatmap

This is exactly what the terminal's heatmap renders. Each row is a strike, each column a moment in time, and the colour shows the gamma stacked there — so you can see at a glance where the heavy springs sit and how the flip level drifts as the day trades.

Example snapshot

The picture you've just built — bowl versus dome, where the flip sits, which strikes carry the most gamma — is the picture the heatmap is drawing in real time.

What to carry forward

• GEX = the net, sign-aware sum of dealer gamma across the whole market.
• Positive GEX → dealers sell rips and buy dips → moves are damped → pinning.
• Negative GEX → dealers buy rips and sell dips → moves are amplified → trending.
• The gamma flip (zero-gamma level) is the price where the regime switches.
• It describes the size and character of moves — never the direction.

That last point is the whole game: the regime sets up conditions, and the heavy strikes act like walls and magnets. Next we put the two together — how positioning makes some levels pin and others break.

Next step

See live GEX on SPX.

The live map plots dealer gamma against spot and marks where it flips — the exact curve from this lesson.

See live GEX on SPX →