Gamma Exposure (abbreviated as GEX) refers to estimated market maker gamma for each individual strike. Gamma measures the change in delta with respect to the underlying price, and GEX is used to evaluate the amount of gamma held by market makers. This metric is used by traders to understand market maker hedging activity at or near specific strikes.

Image description: GEX by Strike, as shown in SpotGamma TRACE.

SpotGamma’s GEX by Strike is featured in the TRACE Strike Plot. GEX is measured in dollar notional terms based on the current price.

Blue (positive GEX): Market makers hold a positive gamma position; therefore, they are long calls or long puts. At these strikes, the market may encounter support or resistance as dealers hedge against the market (sell underlying during rallies, buy underlying during a sell-off).

Red (negative GEX): Market makers hold a negative gamma position; therefore, they are short calls or short puts. At these strikes, market maker behavior will exacerbate price movement at these strikes (buy underlying during rallies, sell underlying during a sell-off).

If you are interested in learning more about TRACE, check out the full TRACE User Manual.

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