What does positive vs negative gamma exposure mean?

Positive: dealer hedging leans against price moves, dampening volatility. Negative: hedging chases moves, amplifying them. The sign flips at the zero-gamma level.

What is a gamma wall?

A strike with unusually large net gamma. In long-gamma regimes heavy strikes attract and hold price — the pinning effect most visible near large expirations.

How reliable are GEX estimates?

Directionally useful, precisely wrong. The dealer-positioning convention is an approximation and open interest lags intraday flow (especially 0DTE), so treat levels as zones.

Gamma Exposure (GEX): How Dealer Hedging Moves Markets

Options market makers don't bet on direction — they hedge it. At size, their hedging becomes a mechanical flow in the underlying, and its sign depends on one Greek: gamma.

The mechanics

A market maker who sells you an option immediately hedges the delta in the underlying. But delta changes as price moves — that's gamma — so the hedge must be continuously adjusted. Whether those adjustments stabilize or destabilize price depends on the sign of the dealer book's aggregate gamma:

Dealers net long gamma (typically when investors have sold calls / own protective structures dealers are long against): as price rises dealers sell into strength, as it falls they buy weakness. Hedging leans against the move — volatility gets dampened, price “pins” near heavy strikes.
Dealers net short gamma (crash hedging demand, heavy put buying): hedging chases the move — selling into declines, buying into rallies. Moves get amplified, and vol expands.

Estimating it: GEX by strike

Gamma exposure (GEX) aggregates, strike by strike, open interest × per-contract gamma × contract multiplier, signed by an assumption about which side dealers are on (the standard convention: dealers long calls, short puts, reflecting typical customer flow). Summing across strikes gives net dealer gamma; plotting it by strike shows the profile around spot:

Gamma walls — strikes with large positive exposure act as magnets/resistance in long-gamma regimes (pinning into expiration is the classic case).
The zero-gamma flip — the spot level where net gamma changes sign. Above it, hedging dampens; below it, hedging amplifies. Crossing the flip level is why sell-offs often accelerate once they reach a particular area.

Using it

GEX is context, not prophecy. In a high positive-gamma regime, fading intraday extremes and expecting range compression has a mechanical tailwind; in negative-gamma territory, breakouts and trend days become more likely and stop placement deserves more respect. It complements volatility-regime tools: term-structure stress plus a flip below zero gamma is a materially more dangerous tape than either alone.

Caveats

The dealer-side assumption is crude. Real books deviate from “long calls, short puts,” and flow-based refinements change the picture, sometimes a lot.
Open interest is a daily snapshot, and the modern explosion of 0DTE options means intraday positioning can swamp yesterday's OI.
GEX describes hedging pressure, not demand for the underlying — a strong macro flow can steamroll a gamma wall without pausing.

Gamma exposure (GEX), explained