Gamma Exposure from zero
1/5What is gamma exposure?
Every option has gamma — a measure of how fast the dealer's hedge ratio changes when the underlying moves. Sum that gamma across every outstanding contract at every strike, and you get gamma exposure (GEX).
Retail and institutions buy options. Dealers (market makers) take the other side. To stay risk-neutral, dealers continuously hedge by buying or selling the underlying. Gamma tells them how aggressively they need to rebalance.
One option at one strike has a bell-shaped gamma curve. But the market has thousands of contracts spread across many strikes. Stack them all up and you get the aggregate GEX profile — the total hedging pressure across the entire options complex.
Toggle individual positions on and off, then hit “Show total GEX” to see how they combine. Notice how the high-OI strike at 100 dominates the shape. That single cluster of open interest drives more hedging flow than everything else combined.
Dealers are not speculating. They sold you the option and now they are stuck with the gamma. Their hedging is mechanical: when price moves, they must rebalance. That forced flow is what makes GEX a market structure signal, not a sentiment indicator.
The formula: Γ × OI × S²
Each strike contributes gamma exposure proportional to three things: how much gamma is there, how many contracts sit at that strike, and the spot price squared.
OI — open interest (number of outstanding contracts).
S² — spot price squared (converts gamma from % to dollar terms).
100 — contract multiplier (each equity option controls 100 shares).
Change the inputs below. Watch how a single high-OI strike generates more GEX than multiple low-OI strikes combined. This is why GEX analysis focuses on the big strikes — the flow comes from where the contracts are.
Try setting one strike to 3000 OI and another to 300. The high-OI strike will dominate the total GEX number, even if its gamma is slightly lower. Open interest is the multiplier that turns theoretical gamma into real hedging flow.
Positive vs negative GEX
The sign of GEX determines whether dealers are stabilizing or destabilizing the market. This is the core insight of GEX analysis.
Positive GEX means dealers are net long gamma. When the market drops, their delta decreases — they need to buy the dip. When it rallies, their delta increases — they need to sell into strength. Both actions push price back toward where it started. The result: dampened moves, mean-reversion, lower realized volatility.
Negative GEX means dealers are net short gamma. Now everything flips. Market drops → dealers sell. Market rallies → dealers buy. They amplify every move instead of dampening it. The result: trending markets, breakouts, higher realized volatility.
Hit “Re-simulate” a few times. The positive GEX path stays range-bound around 100. The negative GEX path wanders — sometimes violently. Same random shocks, opposite dealer behavior, completely different outcomes.
In positive GEX regimes, mean-reversion strategies work: sell the rip, buy the dip. In negative GEX regimes, momentum strategies work: follow the trend, do not fade moves. Knowing which regime you are in changes the playbook.
The flip level
The gamma flip is the price where total GEX crosses zero. Above it, dealers dampen. Below it, dealers amplify. It is the single most important level in GEX analysis.
Typically, large call open interest sits above the current price (positive GEX contributions) and put open interest sits below (negative GEX contributions). The balance between them determines the flip level.
Drag the spot price slider below. Watch the GEX bars change as gamma shifts with the underlying. Notice where the total flips from positive to negative — that is the flip level.
SpotGamma publishes this level daily for the S&P 500. When the index trades above the flip, expect low volatility and mean-reversion. When it breaks below, expect the market to accelerate in whatever direction it is moving.
GEX and expiry
Gamma concentrates near the strike as expiry approaches. An ATM option with 1 day left has far more gamma than the same option with 90 days. This means GEX effects spike into expiration.
As time shrinks, the gamma curve sharpens into a spike centered on the strike. The option is approaching its binary moment — it will either expire worthless or in the money, and small price moves tip the balance. Dealers must rebalance aggressively.
Drag the time slider toward 1 day. Watch the GEX curve sharpen and the peak value explode. This is why quarterly expirations, monthly expirations, and 0DTE options create outsized market impact.
The dashed line shows the GEX profile at 90 DTE for reference. As you pull time to expiry down, the solid curve towers over it. Same strike, same OI, completely different hedging pressure.
After expiration, that gamma vanishes instantly. A market pinned to a strike by massive GEX can suddenly move freely. This is why the days immediately after large expirations often see a volatility expansion.
Where to go next:
Gamma — the Greek that GEX aggregates across all dealers
Delta — the hedge ratio that dealers adjust based on gamma
Vol Indices — VIX, BVIV, EVIV and how they relate to GEX regimes