HOLLOW POINT TRADING
What is GEX?
GEX stands for Gamma Exposure—a measure of how much market makers need to hedge based on their options positions. It's one of the most powerful tools for understanding intraday market dynamics and predicting potential support/resistance levels.
When market makers sell options, they must dynamically hedge by buying or selling the underlying. GEX tells you how much they need to buy or sell for every 1% move in the underlying.
How GEX Works
The Hedging Mechanism
Market makers are typically short gamma (they've sold options to customers). To stay delta-neutral:
- When price goes UP, they must BUY stock (their delta has gone more negative)
- When price goes DOWN, they must SELL stock (their delta has gone more positive)
This creates a momentum effect—their hedging amplifies moves in the direction of travel.
Positive vs Negative GEX
📈 Positive GEX (Dealer Long Gamma)
• Market makers BUY on dips, SELL on rips
• Creates mean reversion
• Lower volatility, smoother price action
• Chop city—range-bound trading
• Great for selling premium
📉 Negative GEX (Dealer Short Gamma)
• Market makers BUY on rises, SELL on dips
• Creates momentum/trending
• Higher volatility, violent moves
• Trend days, overshoots
• Dangerous for premium sellers
Key GEX Levels
| Level | What It Means | How to Trade It |
|---|---|---|
| GEX Flip / Gamma Flip | Price where GEX goes from positive to negative | Volatility regime change point |
| Call Wall | Strike with largest call gamma | Resistance—price magnetically attracted |
| Put Wall | Strike with largest put gamma | Support—dealer buying creates floor |
| HVL (High Volume Level) | Strike with highest total OI | Major area of options activity |
Trading with GEX
🎯 Practical Applications
- Above GEX Flip: Expect chop, sell premium, fade extremes
- Below GEX Flip: Expect trends, reduce position size, wider stops
- At Call Wall: Resistance—consider taking profits on longs
- At Put Wall: Support—potential bounce zone
- Watch for 0DTE: Daily expiration options create massive intraday GEX swings
GEX Changes Throughout the Day
GEX isn't static—it changes as:
- Options expire: 0DTE options create massive intraday volatility
- Price moves: As spot moves, the gamma at each strike changes
- New positions open: Large options trades shift the GEX profile
The most reliable GEX levels are typically set in the morning based on overnight data. Intraday moves can temporarily overwhelm GEX effects.
Where to Get GEX Data
| Source | Features |
|---|---|
| SpotGamma | Industry standard, daily levels, educational content |
| Menthor Q | Real-time updates, institutional quality |
| Geeks of Finance | Real-time GEX charts, affordable |
| Build Your Own | Use Theta Data + Python for custom analysis |
GEX: See What Market Makers See
Understanding GEX gives you insight into the mechanical flows that move markets. It's not about predicting direction—it's about understanding regime. Are we in a grinding, mean-reverting environment? Or a trending, volatility-expansion phase?
Trade with the flow, not against it. GEX tells you which way that flow is going.