Options flow and GEX: reading SPX context to trade ES and NQ
The field test: does the limit reload?
GEX is a model. It can get the sign wrong on a strike, and the displayed gamma flip can be off by twenty points. So you need a purely order flow test to tell, live, a player who is defending from a hedging flow that is consuming. That test exists, and it is simple.
The principle
A discretionary player reloads. A fund that wants to buy 1,500 ES at a level posts, gets eaten, posts again at the same price, gets eaten, posts again. His iceberg absorbs more than it shows. The intent is visible in the repetition.
A hedging flow does not reload. The market maker defends nothing: he consumes the available liquidity to bring his delta back to zero. He has no reason to post a limit at a level, let alone to repost it. A hedge, in your book, is aggression in small clips, or a limit very close to price that disappears as soon as it is filled.
The rest of this lesson is for students
- The protocol
- The narrow exception to the module's rule
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