SVQ · Dealer positioning
Gamma exposure (GEX)
Also called: GEX, dealer gamma exposure, net gamma exposure
Gamma exposure (GEX) estimates how much options dealers may need to buy or sell to stay hedged as the underlying price moves.
Definition
Gamma exposure, usually shortened to GEX, is an estimate of the aggregate gamma held by options market makers (dealers) on an underlying, translated into the dollar amount of the underlying they would have to trade to stay delta-neutral for a given move in price.
It is computed from open interest and model gamma at each strike, then summed across strikes and expiries. Because nobody publishes who is long or short each contract, GEX always rests on an assumption about dealer positioning.
Intuition
A dealer who sells an option usually hedges its delta with the underlying. Gamma is how fast that delta changes, so it tells you how much re-hedging a move forces. If dealers are net long gamma, they sell into rallies and buy into dips, which tends to damp moves. If they are net short gamma, they buy as price rises and sell as it falls, which can amplify moves.
Traders watch GEX because those hedging flows are mechanical: they do not depend on anyone's opinion of the asset, only on the options book and the price path.
How it's calculated
For each strike K and expiry, a common convention is:
GEXK = ΓK × OIK × multiplier × S² × 0.01
Here Γ is the per-share Black–Scholes gamma at the current implied volatility, OI is open interest, the multiplier is shares per contract (typically 100 for US equity options), and S is spot. The S² × 0.01 factor converts gamma into dollars of delta change per 1% move in the underlying.
The naive sign convention treats call open interest as dealer-long gamma (positive) and put open interest as dealer-short gamma (negative), then sums: Net GEX = Σ GEXcalls − Σ GEXputs. More careful models infer dealer side from trade direction, but every version is still an estimate.
How to read it
Large positive net GEX suggests hedging flows that lean against price moves; large negative net GEX suggests flows that lean with them. The strikes carrying the most gamma show where re-hedging would be heaviest if price traveled there.
Gamma is largest for at-the-money options close to expiry, so the profile changes quickly as expiries roll off and as spot moves. Treat GEX as a description of the current options book and a set of conditional scenarios, not as a forecast of where price will go.
Common mistakes
- Treating GEX levels as guaranteed support or resistance. They mark where hedging pressure would concentrate under the positioning assumption, nothing more.
- Forgetting the sign assumption. If customers are net short calls or long puts in a different pattern than assumed, the sign of the estimate can flip.
- Ignoring expiry: a large share of gamma can disappear at the next expiration and change the picture overnight.
- Comparing raw GEX across underlyings of very different size without normalizing, for example by average daily traded value.
In Saqrid
SVQ's gamma exposure playbook shows call and put concentration, a gamma balance point, a concentration-strength score and IF/THEN scenario cards for a symbol.
Option marks without a two-sided quote carry a fair-value label, so you can tell a model mark from a tradeable price.
Open SVQ.
Go deeper
Saqrid Institute lesson: Gamma Exposure (GEX) & Dealer Hedging. Lesson text is open to read without an account.