Updated 2026-07-25
Gamma exposure, often written GEX, estimates how much hedging flow the options market generates as spot moves. Gamma is the rate of change of delta, so a dealer who is short gamma must buy into rallies and sell into declines to stay hedged, amplifying moves, while a dealer who is long gamma does the reverse and dampens them.
Aggregated across strikes, this produces the well-documented behaviours traders watch near expiry: price pinning in long-gamma zones and accelerating in short-gamma ones. Two caveats keep it honest. GEX is an estimate, because dealer positioning is inferred rather than published, and the sign convention depends on assumptions about who is short which strikes. It is also a conditional effect, strongest into large expiries and weakest when options open interest is small relative to spot volume. Related: max pain.