Gamma Levels

Call Resistance Level

In this lesson, you’ll learn how to identify and trade the Core Resistance Level, which represents the strike price with the highest net call gamma exposure. Unlike traditional technical resistance, this is a structural ceiling driven by option positions and dealer flows, making it a powerful forward-looking tool for anticipating price behavior.

The Core Resistance appears as the widest green bar on the Net Gamma Exposure chart. This zone represents where dealers have significant exposure to call options and are likely to hedge more actively as price approaches. As price nears this level, dealers who are long gamma begin to sell the underlying asset or futures to stay delta neutral, creating selling pressure that can halt upward momentum. Additionally, many traders take profit or close positions at these levels, reinforcing the potential for a pullback or pause in price.

You’ll discover two primary scenarios when price approaches Core Resistance. The first is rejection, where dealer hedging pressure and profit-taking create mechanical selling that causes price to stall, reject, or reverse—even without news or fundamental catalysts. The second scenario is breakout, which occurs when call buyers step in and roll positions to higher strikes. This causes dealers to shift from selling to buying, and the Core Resistance can actually become a new support zone after the breakout.

The lesson includes real-world examples demonstrating both scenarios. You’ll see how Palantir rejected at Core Resistance and reversed lower, while Amazon broke through its Core Resistance with strong bullish activity, turning that level into new support. The SPX approaching the 6000 level is also discussed as an example where Core Resistance coincided with a psychological level.

Understanding Core Resistance gives you insight into dealer hedging behavior, flow imbalances, and potential inflection points. Because this level is based on forward-looking option positioning rather than past price action, it provides a unique edge for anticipating where price may encounter resistance or break into new territory.

Video Chapters

  1. 00:15 – Introduction to Core Resistance Level
  2. 00:39 – Why Core Resistance matters for dealer hedging
  3. 02:19 – Rejection scenario at Core Resistance
  4. 05:18 – Palantir rejection example
  5. 05:33 – Breakout scenario at Core Resistance
  6. 07:03 – Amazon breakout example

Key Takeaways

  1. Core Resistance is the strike price with the highest net call gamma exposure, appearing as the widest green bar on the Net Gamma Exposure chart
  2. Dealers who are long gamma sell the underlying or futures to stay delta neutral, creating selling pressure that can cause price rejection
  3. When call buyers roll positions to higher strikes during a breakout, Core Resistance can shift higher and become new support
  4. This level is based on forward-looking option positioning rather than technical analysis, providing unique insight into potential price inflection points
Video Transcription

[00:00:15.18] - Speaker 1
So the first level that we're going to talk about is our core resistance level. The core resistance is really the strike price with the highest net cold gamma exposure. What you see here on the right is again the same chart we showed you earlier, which is our net General Jax chart. Net gamma exposure chart. The core resistance is really simply the widest green bar that you see there.

[00:00:39.07] - Speaker 1
It represents a zone where dealers have significant exposure to call option and therefore are likely to hedge more actively as price approaches these areas.

[00:00:52.29] - Speaker 1
Why? Why does it matters? Because as price approaches the core resistance level, dealer who are long gamma begin to sell either the underlying asset or future to stay delta neutral. And this selling can create a resistance to further upside move. On the other hand, many traders are also taking profit or close positions at these levels and that is reinforcing the potential for a pullback or a pause in price because as investors are closing those positions, the market makers do not need to keep those edges up and that can cause the price to reverse.

[00:01:29.03] - Speaker 1
But on the other hand, if the market is strong call buyers may actually not sell. They may roll their position up to higher strikes and this can cause the core resistance to shift higher. And that obviously has a very big impact on dealer hedging where they shift again from selling to buying again and again that can be very important thing because that could actually be an inflection point. So the tech, the core resistance is really not just don't think about resistance in technical term is really a technical ceiling, is a structural ceiling is driven by option positions and dealer flows. So we call it resistance because again it is a resistance but it's not based on technical analysis, is based on option positioning.

[00:02:19.28] - Speaker 1
Right. Now let's walk through, let's walk through some of the scenarios of what could happen when the price approaches the core resistance. Right. So the first scenario is what we call a rejection, right. When the price rallies into the core resistance, it's approaching a zone with the highest net cold gam exposure.

[00:02:47.02] - Speaker 1
This is where dealers who are often long garment need to sell the underlying or the futures to stay delta hedge. So we are going to see when we approach this level a lot of dealer hedging pressure. So as the price approaches the core resistance delta increases rapidly on the calls and dealers are mostly short. Possibly this is going to be a simplistic explanation. We want to make it clear and we want to help you understand how to use that.

[00:03:18.24] - Speaker 1
So to stay neutral, dealers must sell more futures and that can create a mechanical selling pressure into the level. Right. Even if there's no news or fundamentals data coming out. On the other hand, another scenario that we could see happen is that a lot of traders that were long calls are monetizing. So as the price approaches their strike, they are monetized, they start to take profit.

[00:03:46.09] - Speaker 1
And again those clothes might be, might be closed which also causes dealers to unwind their long hedges. And again selling the underlying asset. We also see what we call flow imbalance. So if we don't see more call buyers or bullish positioning above the core resistance, the hedging flow is dominating. This is where we often see the price stalls, rejects or even reverse at the core resistance level.

[00:04:16.04] - Speaker 1
Even if we are in a bullish, in a bullish trend. And then of course the core resistance also becomes a psychological layer. It's all, it's most likely on round numbers or prior highs. Adding also a psychological resistance that reinforces the trader behavior. So if you guys remember a few months ago when the SPX was approaching the 6000 level, that was also very big core resistance, that was of course a psychological level for traders and the price kind of rejected around, around that area.

[00:04:52.00] - Speaker 1
All right, In this slide we can also simplify this and we're going to make those slides, there was a question before. We're going to make those slides available within the academy. So we have gonna make some changes so those slides will be available as well. Let's look at an example. So this was an example of that we took yesterday was I think the previous day, this was Palantir.

[00:05:18.22] - Speaker 1
We saw the price approaching the core resistance on the previous day. Then on the next day the price open at core resistance and reverse back.

[00:05:33.21] - Speaker 1
All right, then we also have a second scenario right on how we can trade the core resistance. And in this case we are talking about the breakout. So what's happening behind the scenes? In this case, call buyers step in. So as the price approaches the core resistance bullish trader actually start opening or rolling call positions to higher strike.

[00:05:58.10] - Speaker 1
So they believe the price could actually go much higher. So they take bets and, and positions on higher, higher strikes. So dealers who were previously long gamma now face rising that exposure on the new codes that have been open. And especially if we are near expiration or in fast moving market, they must hedge with price. They must actually hedge higher.

[00:06:25.17] - Speaker 1
So they might have to buy futures or underlying asset. As the price rises. We also can see a structural shift. So if more call buyers or traders are now adding bets at higher strikes, the core resistance might no longer be a ceiling. So it could actually become a support zone.

[00:06:49.16] - Speaker 1
So obviously what we can see that sometimes the price tends to retest those level and then of course can actually become an inflection point.

[00:07:03.16] - Speaker 1
This is again another simplification on what could happen when we do breakout. And again, this is an example that we took this week as well on Amazon. As we broke through that core resistance, we basically saw very, very strong bullish activity going higher. And then of course, the price, the core resistance in this case became now a new support area. Again, this is important because it's not based on past price action is based on forward looking, option positioning.