Gamma Exposure (GEX) Explained
How dealer hedging creates support and resistance levels
What Is Gamma Exposure?
Gamma exposure (GEX) measures the total gamma held by market makers across all option strikes. It quantifies how much hedging dealers must do when the stock price moves. Positive GEX means dealers are long gamma and will hedge by buying dips and selling rallies — creating a mean-reverting, stable market. Negative GEX means dealers are short gamma and must chase price moves — amplifying volatility.
Why GEX Matters
GEX effectively reveals hidden support and resistance levels created by dealer hedging flows. The strike with the highest positive GEX acts as a magnet — the stock tends to pin near it. When GEX flips negative, the market enters a regime where moves are amplified and volatility spikes.
Reading a GEX Chart
A GEX chart shows gamma exposure at each strike price. Tall positive bars indicate strikes where dealers will aggressively hedge, creating stability. The "GEX flip" point — where aggregate gamma crosses from positive to negative — is a critical level. Below this point, expect increased volatility.
Key Terms
Gamma — The rate of change of delta per $1 move in the stock
GEX (Gamma Exposure) — Total gamma across all strikes, indicating dealer hedging pressure
GEX Flip — The price level where aggregate dealer gamma switches from positive to negative
Dealer Hedging — Market makers buying or selling stock to remain delta-neutral