Decode market maker behavior through options gamma exposure to identify high-probability trading opportunities and optimize your strategic positioning in any market environment
Positive Gamma Environment
Stable Rallies
Markets exhibit more predictable upward movements with controlled pullbacks
Buy the Dip
Market makers systematically purchase assets during price declines and rallie, supporting key levels
Lower Volatility
Actual market volatility remains contained below options-implied volatility expectations
Negative Gamma Environment
Unstable Rallies
Price advances typically face aggressive selling pressure
Sell the Rip
Market makers systematically sell into market weakness especially after the price rejected at the resistance
Technical support levels maintain structural integrity
Minimal extreme downside risk events
Negative Gamma
Elevated realized volatility exceeding IV
Persistent directional momentum and trend continuation
Technical levels frequently breached with less volume
Increased probability of extreme price movements
Buy Into Weakness Strategy
Entry Criteria
Price retraces to significant gamma support level, creating high-probability buying opportunity
Confirmation
Increasing trading volume signals active dealer hedging (GVEX), validating support strength
Risk Parameters
Position strict stop loss just below the nearest gamma strike price to minimize potential downside
Sell Into Strength Strategy
Entry Criteria
Price approaches gamma resistance level
Confirmation
Volume spike confirms institutional selling pressure(GVEX) amid declining gamma support
Risk Parameters
Set tight stop-loss above nearest gamma spike above price to minimize potential losses
Key Terminology
POS GEX
Total positive gamma exposure in the market, indicating potential upward price support.
NEG GEX
Total negative gamma exposure in the market, creating potential downward price pressure.
PPG
Peak positive gamma location, representing the strike level with most positive gamma.
PNG
Peak negative gamma location, representing the strike level with most negative gamma.
Market Environments
Buy The Dip Environment
When POS GEX > NEG GEX, market conditions favor buying during price declines. Support levels are stronger and upward momentum typically resumes.
Sell The Rally Environment
When POS GEX < NEG GEX, market conditions favor selling during price increases. Resistance levels are stronger and downward momentum typically resumes.
Upward Price Gravitation
When PPG > PNG, prices tend to be pulled toward the Peak Positive Gamma level, creating a natural upward bias in price action.
Support/Resistance Dynamics
When PPG < PNG, the Peak Positive Gamma level typically functions as a resistance zone that prices struggle to break through. Price tends to gravitate towards PNG
Price Above PPG
POS GEX > NEG GEX
PPG provides strong support level
Price momentum carries toward next gamma concentration point
Temporary counter-trend pullbacks likely bought
POS GEX < NEG GEX
Upward rallies face selling pressure
PNG exerts significant gravitational pull on price
Increased probability of downside movement
Price Between PPG and PNG
POS GEX > NEG GEX
Price magnetizes toward PPG level
PNG serves as strong support floor
Downside momentum remains constrained
POS GEX < NEG GEX
PPG establishes firm resistance ceiling
Price tends to gravitate toward PNG
Upside potential significantly limited
Price Below PNG
POS GEX > NEG GEX
Price tends to gravitates toward PNG
Potential to breakthrough PNG resistance
Movement above PNG generally limited
POS GEX < NEG GEX
Strong resistance at PNG level
Significantly higher probability of downward movement
Rallies typically capped at PNG level
Special Case: PNG Above PPG
Price Expansion
Volatility increases during upward movements, resembling short squeezes
Inverted Mechanics
PPG now functions as resistance while PNG acts as support, reversing their traditional roles
Market Context Prevails
The dominant Buy-the-Dip or Sell-the-Rally environment ultimately determines price action and breakout direction
Implementation Guide
Determine GEX Balance
Analyze whether Gamma Exposure is net positive or negative to establish market context
Identify PPG/PNG Locations
Map precise levels of Positive & Negative Gamma concentrations on your chart
Note Price Location
Assess current price relative to nearest PPG/PNG levels to determine potential behavior
Apply Framework Rules
Execute appropriate strategy based on GEX environment and price position
Trading Applications
Support/Resistance
Identify critical price zones where gamma accumulation creates natural market boundaries, offering high-probability entry and exit points
Stop Placement
Strategically position stops beyond key gamma thresholds to avoid common liquidation zones while protecting capital efficiently
Profit Targets
Establish precise exit strategies at significant gamma inflection points where price acceleration or reversal is statistically likely