Gamma Exposure (GEX) measures how option market-makers’ hedging flows react to movements in the underlying asset. Market makers, who typically maintain delta-neutral positions, must continuously hedge their gamma exposure by buying or selling futures/spot to offset the delta of the options they’ve sold or bought. When price moves, option deltas change (that’s gamma), forcing dealers to rebalance, creating structural feedback loops in the market. It's a source of one of the most significant structural flows in the equity markets

At price levels with high positive gamma, dealers hedge in a way that tends to absorb price shocks, they tend to dampen volatility — they buy on dips and sell on rallies, 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 — they sell when prices fall and buy when they rise, 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 vice versa).