GEX Analysis

GEX Analysis refers to Gamma Exposure Analysis, a quantitative method used to measure the aggregate net gamma position of market makers in options contracts. Because market makers must hedge their delta exposure, their collective gamma position dictates whether they need to buy or sell the underlying asset as its price moves.

When market makers are net long gamma, they hedge in a way that dampens volatility, selling as prices rise and buying as prices fall. Conversely, when they are net short gamma, they must hedge in a way that exacerbates volatility, buying as prices rise and selling as prices fall.

By calculating GEX, traders can identify price levels where market maker hedging activity is likely to create significant support or resistance. This analysis is crucial in both traditional equity markets and the cryptocurrency derivatives space, where options liquidity heavily influences spot price action.

It provides insight into the mechanical forces behind market momentum and potential inflection points.