Gamma exposure (GEX)

Gamma exposure, usually shortened to GEX, measures how much delta-hedging pressure options dealers are carrying at any given price level for a ticker. Every option a dealer sells creates an obligation to hedge with the underlying stock, and how much stock they need to buy or sell as price moves depends on gamma: the rate at which an option's delta changes per point of underlying movement. Net GEX adds that hedging obligation up across every strike and expiry in the chain into one number. Positive means dealers are, in aggregate, long gamma; negative means they are short gamma. It's a snapshot of dealer positioning, not a forecast of price.

The sign matters more than the size. When net GEX is positive, dealers typically hedge by selling into rallies and buying into dips, a stabilizing flow that tends to compress realized volatility and keep price oscillating in a range. When net GEX flips negative, dealers do the opposite: buying as price rises and selling as it falls, which adds fuel to whatever direction the market is already moving in. A market sitting on a large positive GEX cushion behaves very differently from one with the same spot price but a deeply negative GEX reading.

GEX doesn't tell you which way price is going next. It tells you how forcefully dealer hedging will react once price gets to a given level. It also can't capture flow that hasn't happened yet: a large options order placed after the last snapshot can shift the whole profile before it refreshes. And it assumes a standard dealer-positioning convention (broadly short calls, long puts against retail and institutional flow) that holds most of the time but isn't a certainty for every name in every regime. Treat it as a map of hedging pressure, not a signal to trade on its own.

Here's how the arithmetic plays out. SPY is trading at 550 and the profile shows plus $2.1 billion in net GEX concentrated between the 540 and 560 strikes, with the flip line sitting at 535. Above 535, dealers are net long gamma, so a move up to 555 gets met with selling into strength and a move down to 545 gets met with buying, both dampening the swing. Now flip the scenario: the same tape instead shows minus $1.8 billion in net GEX with the flip line at 552, above spot. The market is already in the amplifying regime. A drop toward 545 would draw more dealer selling rather than buying, and the same size move down would tend to run further and faster than in the first case.