GEX: definition, sign convention, and what it is not

The definition

GEX (gamma exposure) is an estimate of the market makers' net gamma position, summed over all the options on an underlying. It is expressed in dollars of delta to adjust for a 1% (or 1-point) move in the index. "GEX of +4 billion" means: if the index rises 1%, market makers will have to sell 4 billion dollars of futures to stay flat; if it falls 1%, they will buy as much.

The sign is everything:

• positive GEX: market makers are long gamma, their hedging dampens;
• negative GEX: they are short gamma, their hedging amplifies.