GEX (Gamma Exposure)
GEX (Gamma Exposure) is a measure of the total gamma exposure of market makers and dealers at different strike prices. It quantifies how much dealers need to hedge as prices move, creating mechanical buying and selling pressure that acts as support and resistance.
- Positive GEX — Dealers are net long gamma. They buy dips and sell rallies, reducing volatility and "pinning" price near high-GEX strikes.
- Negative GEX — Dealers are net short gamma. They must hedge in the same direction as price movement, amplifying moves in either direction.
- Gamma Flip Level — The price where GEX switches from positive to negative. Below this level, expect higher volatility.
- GEX Walls — Strike prices with very large gamma that act as strong mechanical support or resistance.
- Net GEX — The aggregate gamma exposure across all strikes. High positive net GEX = calmer market; negative = potential for explosive moves.
How GEX Creates Support & Resistance
When a stock has large positive GEX at a particular strike (say $150), dealers who are long gamma at that level must sell as the stock rises above $150 and buy as it falls below $150. This creates a mechanical "magnet" effect that pins the stock near that price. Conversely, in negative GEX zones, dealers must sell as the stock falls and buy as it rises — amplifying moves and creating the volatile, gap-prone action often seen during selloffs.
Using GEX in Trading
Traders use GEX to: • Identify key support/resistance levels based on dealer positioning, not just chart patterns • Gauge whether the current environment favors mean-reversion (positive GEX) or trend-following (negative GEX) • Anticipate volatility regimes around the gamma flip level • Size positions appropriately based on expected volatility