Definition. Gamma Exposure (GEX) measures how option market-makers' hedging flows react to movements in the underlying asset.

Technical. Market makers, who typically maintain delta-neutral positions, must continuously hedge their gamma exposure by buying or selling futures or spot to offset the delta of the options they have sold or bought. When price moves, option deltas change (that is gamma), forcing dealers to rebalance and creating structural feedback loops in the market. It is a source of one of the most significant structural flows in the equity markets. GEX is estimated from per-trade taker tags on the underlying options venues.

Interpretation. At price levels with high positive gamma, dealers hedge in a way that tends to absorb price shocks, dampening volatility by buying on dips and selling on rallies and keeping prices pinned near those strikes (so-called "gamma gravity" or "pinning" effects). At price levels with high negative gamma, dealers' hedging flows amplify price moves, selling when prices fall and buying when they rise and often increasing short-term volatility. For directional traders, monitoring where the sign of GEX changes helps anticipate regime shifts from quiet to volatile markets and back.