Gamma Exposure (GEX)

How Gamma Exposure Is Calculated

Gamma exposure quantifies the dollar value of shares dealers must trade to maintain delta-neutral positions as the underlying moves. For a single option contract:

Where:

• $\Gamma_i$ is the option's gamma (second derivative of price with respect to underlying)
• $OI_i$ is the open interest at that strike
• $S$ is the current underlying price
• The factor $100$ converts to shares per contract, and $0.01$ normalizes for a 1% move

Net GEX and the Dealer Convention

Gamma is identical for a call and a put at the same strike and expiry, so the sign in a GEX calculation cannot come from the option's right. It comes from who is long and who is short: long an option is long gamma, short an option is short gamma, either way. Open interest reports how many contracts exist, not who holds which side, so any OI-based figure has to assign a position sign by convention. The standard convention treats call gamma as positive and put gamma as negative, which is equivalent to assuming dealers are long calls and short puts:

The subtraction is that convention rather than a property of the options themselves. Positive net GEX represents dealers holding long gamma: to stay hedged they sell into rallies and buy dips, which dampens realized volatility. Negative net GEX represents short gamma, where the same hedging runs with the move instead of against it and amplifies it.

The Gamma Flip Point

The gamma flip is a hypothetical underlying price where aggregate portfolio GEX crosses zero after the included options are repriced. Keep expiry scope, open interest, volatility assumptions and dealer-sign convention fixed. It is not the cumulative sum of the current strike bars:

Verify the crossing's orientation, returned status and net GEX at the actual price. A missing or unstable crossing is not a numeric zero, and a numeric level is not a guaranteed regime boundary.

Gamma and the Black-Scholes Model

Under Black-Scholes, gamma for a European option is:

Where $\phi(d_1)$ is the standard normal PDF evaluated at $d_1$, $\sigma$ is implied volatility, and $T$ is time to expiration. Gamma is highest for at-the-money options near expiration - which is why 0DTE options create massive GEX concentrations.

Why GEX Matters for Traders

Institutional research from SqueezeMetrics and academic work by Bouchaud & Bonart (2018) demonstrate that dealer hedging flows create measurable price impact. GEX is not a predictive signal - it's a structural one. It tells you the rules of the game for that day.

Expiration Filtering

Near-dated options contribute disproportionately to GEX because gamma scales as $\frac{1}{\sqrt{T}}$. Our API supports filtering by expiration date so you can isolate 0DTE gamma (which drives intraday moves) from longer-dated positioning.

Limitations

• Dealer assumption - GEX has to assume a dealer position, because open interest says how many contracts exist but not who holds which side. The standard convention is equivalent to dealers being long calls and short puts. In practice some OI is inter-dealer or institutional hedging that does not fit that assumption.
• OI is T-1 - open interest is reported end-of-day by the OCC and reflects the previous session's close.
• Not a crystal ball - GEX describes the mechanical hedging landscape, not future direction. Use it alongside price action, not as a standalone signal.