🧬 What is GEX (Gamma Exposure)?

Gamma — The Short Version#

Every options contract has a gammavalue. Gamma measures how fast an option's delta changes when the underlying stock moves $1. Higher gamma means the option's sensitivity to price changes is accelerating.

💡 Think of delta as speed and gamma as acceleration. A high-gamma option reacts more sharply to price moves.

Who Cares About Gamma? — Dealers Do#

When you buy a call option, a market maker (dealer) sells it to you. They're now short gamma. To stay hedged, they must buy shares as the stock goes up and sell shares as it goes down. This is called delta hedging.

The more open interest at a strike price, the more shares dealers need to trade for hedging. This creates measurable buying and selling pressure at specific price levels.

How GEX is Measured#

Gamma Exposure (GEX) estimates the dollar size of the hedging flow that the assumed short-gamma side must execute for a given move in the underlying. It is computed per contract and then aggregated by strike and expiration:

GEX(contract) = |Γ| × OI × 100 × Spot × sideSign

  sideSign:  +1 for Calls   →  positive (blue)
             −1 for Puts    →  negative (green)

|Γ| is the absolute per-contract gamma — a non-negative value for both calls and puts. The sign of GEX comes from the convention applied to the contract type, not from gamma itself.
OI is open interest at that strike/expiry, and × 100 is the standard contract multiplier (shares per contract).
Calls contribute positive GEX and puts contribute negative GEX — this is the convention used across the platform. It assumes the common "dealer short calls / dealer short puts" framing; real positioning can differ on any given day.

Two scaling modes are available:

Per $1 move (default) — the raw formula above.
Per 1% move — multiplied by Spot × 0.01, which normalizes the magnitude across tickers with very different price levels (for example comparing a $500 ETF with a $20 stock).

💡 GEX is a convention-based estimate, not a direct market observation. Treat it as a positioning map — useful for spotting where hedging pressure could concentrate, not a prediction of where price must go.

Why GEX Matters#

Large GEX concentrations create mechanical hedging pressure that can influence price behavior:

High positive GEX (blue) — Dealers are long gamma. They sell into rallies and buy dips → tends to dampen volatility, creating a zone where price often consolidates.
High negative GEX (green) — Dealers are short gamma. They sell into dips and buy into rallies → tends to amplify volatility, creating conditions where moves can accelerate.

Positive vs Negative GEX Environment#

Environment	Dealer Behavior	Typical Market Characteristic
Net Positive GEX	Buy dips, sell rips	🧲 Lower vol, mean-reversion tendency, pinning
Net Negative GEX	Sell dips, buy rips	🔥 Higher vol, trend acceleration, gaps

Where the Data Comes From#

GammaBaba consumes real-time options snapshots — strike prices, open interest, volume, last prices, and greeks when available. When a contract's greeks aren't reported, gamma is estimated from the contract's own market-implied volatility using a standard Black-Scholes model, so each strike and expiration gets its own IV — no single flat volatility is assumed across the board.

Spot prices and market data refresh continuously during US market hours.

🔑 Key Takeaways

GEX is a data visualization tool — it maps mechanical hedging pressure, not future price direction
The largest GEX concentrations often coincide with observable support/resistance zones
Positive GEX = dealer stabilization tendency, Negative GEX = dealer amplification tendency
GEX changes every day as options expire, new positions open, and OI shifts
Near-term expirations have higher gamma → more hedging impact
Calls add positive GEX (blue), Puts add negative GEX (green)
GEX is a model — validate key levels with fixed-strike IV to check if the market agrees

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