Draft for review — not published yet
What GEX measures
Dealers who take the other side of customer options trades usually hedge that risk in the underlying. Gamma measures how much the hedge has to change when the price moves. Gamma exposure (GEX) adds that up across strikes:
GEX per strike = gamma × open interest × 100 × spot² × 1%
The result is in dollars: roughly how much dealers would have to buy or sell for each 1% move, if the assumption below is right. Summed over strikes, it gives a picture of where hedging could cushion moves and where it could feed them.
The assumption nobody can see
Open interest tells you how many contracts exist. It does not tell you who holds them. To turn it into dealer exposure you have to assume which side dealers are on.
The usual convention, and the one TREDIA uses, is that dealers are long the calls and short the puts: customers mostly sell calls against stock and buy puts for protection. Under that convention, call gamma counts as positive and put gamma as negative.
It is a convention, not an observation. When customers buy calls in size, as in a speculative rally, the sign is wrong for those strikes. This is the largest source of error in any GEX figure, larger than how fresh the data is, and it applies to every provider, because no public dataset says who holds what. That is why TREDIA writes the assumption on the screen next to the number.
Open interest is a once-a-day number
Open interest is published once a day, after the clearing process, and it does not change during the session. A GEX figure that updates through the day recalculates gamma at the current price on top of yesterday’s open interest. That is useful, because gamma changes as the price moves, but it is not a measure of positions opened today.
The levels people quote
- Gamma flip. The price where total GEX changes sign. Above it, hedging tends to lean against moves; below it, hedging tends to go with them. Tends to is the honest wording: other flows can and do overwhelm it.
- Call wall. The strike with the largest call gamma. Often watched as resistance.
- Put wall. The strike with the largest put gamma. Often watched as support.
The walls are concentrations of open interest. They are not barriers, and the market does not owe them a reaction.
Why we split by horizon
Across the whole option chain, deep in-the-money contracts that expire a year or more out dominate the totals: one strike can show tens of billions of dollars next to strikes worth a few million. The number is correct, but it flattens everything near the price. TREDIA’s positioning ladder shows delta and gamma exposure for the nearest expiration and for the next seven days, where hedging actually moves.
How TREDIA shows it
- The dealer assumption is written on the screen, next to the number.
- A regime label says what the sign implies, never which way to trade. Negative gamma means hedging can amplify moves; it doesn’t say up or down.
- When there is no earlier session to compare against, change labels stay blank instead of showing 0%.
- Options analytics are in beta while data licensing is finalized, and chain data is labeled as a snapshot with its time.
Gamma exposure is a map of where hedging might matter. Read it with the assumption in mind, next to price, volume and the calendar, and never on its own.
For research and education. Not investment advice.