GEX: formula, strike profile, Zero Gamma

GEX (gamma exposure) estimates, strike by strike, how much of the underlying dealers will have to buy or sell for a given move. Its sign says whether they will slow or accelerate price; its size says how strongly.

The formula

The most common form expresses GEX in hedging dollars for a 1% move:

GEX at strike K = Γ × N × 100 × S² × 0.01 × ε

• Γ: the gamma of an option at strike K.
• N: the number of contracts counted (open interest, the day's volume or the actual MM positions, see the next lesson).
• 100: the SPX multiplier. S: the index price.
• ε: the sign, +1 if dealers are long those options, −1 if they are short.