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    • 🚝Why Choose TradingFlow
    • 🚜Data-driven trading strategy
    • πŸ“šOptions Dictionary
    • Concepts
    • πŸ₯¦Delta Exposure(DEX)
      • DEX Analysis
    • 🐷Delta Impact (DEI)
    • πŸ“€Gamma Exposure(GEX)
      • Intro to Gamma Exposure
      • Real Time Open Interest/Gamma Exposure
      • GEX and IV
      • Call Ladder
      • Gamma Squeeze
    • πŸ₯’Open Interest
      • Option Chain Analysis
      • OI Analysis
    • πŸ₯‘Implied Volatility (IV)
    • 🐡Call wall vs Put wall
    • ⛸️Realtime Option Trades Flow
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  • Quick Overview
  • Long Gamma: A Stabilizing Source
  • Short Gamma (Destabilizing)
  • Why It Matters to You
  • How to Track Gamma Exposure on TradingFlow
  1. Overview

Gamma Exposure(GEX)

PreviousDelta Impact (DEI)NextIntro to Gamma Exposure

Last updated 18 days ago

Quick Overview

Gamma: a measure of how much the delta of an option changes when the price of the underlying stock moves.

  • Delta = how much the option price changes when the stock moves

  • Gamma = how much delta itself changes as the stock moves

Gamma Exposure: The total gamma of their options positions. A high gamma exposure indicates that the delta of the options position will change rapidly as the underlying asset's price fluctuates.

The takeaway is this: gamma exposure determines how option dealers hedge their positions, and their hedging behavior can influence short-term price action in the market.

Long Gamma: A Stabilizing Source

When market makers or dealers are long gamma, they hold positive gamma exposure β€” typically by owning options (either calls or puts).

To manage risk, they adjust their stock holdings dynamically:

  • If the market rises, they sell stock to maintain a neutral position.

  • If the market falls, they buy stock to offset their exposure.

This creates a counter-cyclical effect: dealers are buying into weakness and selling into strength. The result is:

  • Reduced

  • Price stabilization near heavily traded option strike levels (a phenomenon known as "gamma pinning")

The investors should note that:

  • Significant price breakouts are less likely.

  • The market is more likely to trade within a defined range or exhibit choppy behavior.

  • This environment tends to favor income-generating strategies, such as selling option premiums (e.g., covered calls or cash-secured puts), as volatility is generally subdued.

This behavior is most common when there’s a large concentration of open interest in near-the-money options.

Short Gamma (Destabilizing)

In contrast, when market makers are short gamma, they’ve sold options and have negative gamma exposure.

To hedge, they must respond in the same direction as the market:

  • If the market rises, they are forced to buy stock.

  • If the market falls, they need to sell stock.

This creates a pro-cyclical feedback loop, where hedging activity can:

  • Exaggerate price swings

  • Drain market liquidity

  • Drive higher short-term volatility

The investor should note that:

  • The market is more prone to larger, directional price movements.

  • There is an elevated risk of volatility spikes, particularly around key catalysts or technical levels.

  • This environment may favor momentum or trend-following strategies, but investors should exercise heightened risk management and position sizing discipline.

Short gamma environments often emerge near major events (such as earnings or macro announcements), when option selling increases or market makers are overwhelmed by one-sided flows.

Why It Matters to You

  • When the market is in a long gamma environment, price movements tend to stay contained. You may notice stocks hovering near certain strike prices β€” this is often due to gamma pinning from heavy options positioning.

  • When the market is short gamma, moves can become sharper and more extreme. This usually happens around market events or earnings, and it's when risk increases for all traders β€” including you.

How to Track Gamma Exposure on TradingFlow

This dashboard below shows Tesla's daily Gamma Exposure (GEX) β€” a key measure of how option market makers are positioned and how they might hedge price movements.

  • Call GEX and Put GEX represent the total gamma from outstanding call and put options.

  • Net GEX is the combined gamma exposure.

  • The P/C GEX Ratio gives additional context on whether call or put gamma dominates.

A case study is that we see that Tesla’s Net GEX has steadily increased over the past week β€” rising from approximately 541K on May 12 to 855.6K on May 16. This shift suggests dealers are accumulating long gamma exposure, which typically leads to more stable, range-bound price action as dealers hedge by buying into weakness and selling into strength.

As of May 16, 2025, Tesla's gamma exposure has climbed to a multi-week high. A rising Net GEX suggests that market makers are likely long gamma, which generally leads to reduced volatility and supports range-bound trading conditions. This environment favors mean-reverting strategies and implies lower risk of directional breakouts in the short term.

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volatility
Daily Gamma Exposure of Tesla from May 9th, 2025 to May 16th, 2025
Tesla Net Gamma Exposure – May 2025