Dealer Gamma · Desk
Free to readHow Dealer GEX & the Flip Are Computed
Open interest, option gamma, a sign convention, and a running sum. The full recipe — and exactly where the assumptions live.
Net Dealer Gamma Exposure turns the visible option chain into an estimate of how dealers must hedge. Here is each step.
Gamma per strike
For every listed strike and expiration, the tool computes the option's gamma from a standard Black–Scholes model using spot, strike, time to expiry, rate, and implied vol. Gamma is the second derivative of option value with respect to price — how fast delta changes.
Scaling to dollars of hedging
Each strike's gamma is multiplied by its open interest, the contract multiplier (100 shares), and a spot-move factor to express it as the dollar delta dealers must trade per unit move. That converts an abstract Greek into an estimate of real hedging flow concentrated at each strike.
Each strike's gamma exposure is scaled by open interest and signed by the standard dealer convention, then summed.
The sign convention
The signs are where the assumption lives. The standard convention treats dealers as long call gamma and short put gamma — the mirror of a customer base that buys puts for protection and sells calls for yield. Under it, call open interest contributes positive GEX and put open interest negative. It's a well-established heuristic, but it is an assumption: real dealer books vary, and unusual flow can violate it.
Net GEX by strike, and the cumulative profile
Summing signed GEX at each strike gives the Net Dealer GEX by Strike chart. Running that sum across price gives the Cumulative Net GEX profile — the dealers' net gamma as a function of where spot is.
The gamma flip level
The flip is the price where the cumulative profile crosses zero: above it, net dealer gamma is positive (long-gamma, stabilizing); below it, negative (short-gamma, amplifying). Because it depends on open interest and spot, the flip moves as positioning changes and can shift through the session.
Limitations
GEX is a regime heuristic, not a flow model. It assumes the sign convention, uses listed open interest (which lags intraday positioning), can't see OTC or dealer inventory directly, and is sensitive to the implied vols used for the gammas. Read it for regime and concentration, not as a precise prediction of order flow.
How it maps to the Nations suite
Dealer gamma is the positioning lens. Pair it with the implied-vol tools — VolDex® Term Structure (cost across time), Skew Deconstruction (cost across strikes), and Volatility Cones (cost versus realized history) — and you see both what vol costs and how the hedging of it is likely to push price.
The method is free. Run it on ETFs with ETF Analytics, single names with ETF + Equities, and export the full GEX-by-strike series with Everything.
See plans →Educational content from Nations Indexes. GEX is an estimate under a standard sign convention; it is a regime heuristic, not a precise flow model, and is sensitive to the inputs described above. Nothing here is investment advice.