What is Gamma?

🔎 What is Gamma?
Gamma Exposure (GEX) measures how much and how fast an option’s Delta changes as the underlying moves.
Why does this matter? Because when options shift, market makers must hedge, and their hedging can move markets.

Gamma = the “acceleration” of Delta.
Large gamma zones = areas where market makers must hedge aggressively.
These hedges often create temporary support or resistance levels.
Think of Gamma as the invisible hand shaping intraday price action.

⚡ Why is Gamma Important?
Market makers aren’t directional traders — they aim to stay delta-neutral. But depending on whether they’re in a positive or negative gamma environment, their hedges can either calm the market or fuel volatility.

✅ Positive Gamma
Dealers are net long calls.
Price Drop: They buy underlying to hedge → creates support.
Price Rise: They sell underlying to hedge → creates resistance.
Result: Market stays stable, moves are dampened.

❌ Negative Gamma
Dealers are net short puts.
Price Drop: They sell underlying to hedge → adds downward pressure.
Price Rise: They buy underlying to hedge → adds upward pressure.
Result: Market becomes unstable, moves are amplified (higher volatility, risk of squeezes).

📍 Key Gamma Levels to Watch
Zero Gamma:
Pivot point where hedging flows are balanced. Price often consolidates or pivots here.

Major Positive Gamma Zones:
Act as resistance (dealers sell into strength).

Major Negative Gamma Zones:
Act as support (dealers sell into weakness, but may cause bounces).