Understanding Gamma Levels

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Hi, I'm Fabio, founder of Mentor Q. I began my career at Bloomberg working alongside some of the biggest banks and asset managers in London and New York. That's where I learned how critical data is to decision making and how the right tools can give professionals a serious edge. Later I joined the startup that focused on alternative data for large institutions and hedge funds and it became clear finance was evolving fast and most traders were being left behind. Then came Covid and everything changed and I saw a clear gap. Retail traders were lacking the tools, the models and insights the institutions were using every day.

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That's what led to Mentor Q. We created Mentor Queue to bridge that gap to give traders access to institutional grade insights without the complexity. Our mission is very simple. We want to bring pro level data to everyday traders, simplify the noise into clear, useful signals and help traders trade smarter with with better risk management and more precision. Today we are diving into Gamma levels, a powerful tool that helps explain why price stalls, accelerates or reverses even when there's no news.

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Understanding Gamma isn't just for option traders. It's a game changer for future traders who want to build a strategy that's driven by real market mechanics, not just charts. Gamma is not just an option Greek it's one of the most influential forces behind price behavior in today's markets. Understanding Gamma allows you to move beyond surface level analysis and start interpreting the flow behind the price. Why it stalls at certain levels accelerates unexpectedly or reverses without warning.

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For futures traders, it's not just theory. Gamma translates into execution. Understanding how to use Gamma levels can provide tighter and more informed entries, improved risk management and the ability to anticipate volatility before it appears on your chart. Every successful strategy needs an edge and Gamma gives you the insight into the forces that actually move the market. You can't control the market, but you can understand how it moves.

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We are going to go over why Gamma is key for futures traders. Gamma helps explain sharp moves that don't show up in the news. It reveals how dealer hedging is driving real buying or selling levels. With high Gamma often act as magnets. Price tends to pause or reverse there, helping you time trades and avoid fake breakouts.

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Gamma also tend to increase as expiration nears, especially at key strikes. And that can lead to fast unexpected price swings. So understanding where dealers are positioned lets you follow the real market flow instead of trading against it. But let's start with the basics. What is Gamma?

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In options trading, Gamma measures how fast delta changes as the price of the underlying asset moves If Delta shows how much an option moves when the price changes Gamma. Gamma shows how fast Delta itself is changing as the market moves. Delta tells you how much the option reacts to price, while Gamma tells you how fast that reaction is speeding up or slowing down. Gamma tells you the sensitivity of Delta to price changes. And that matters because dealers and market makers hedge based on Delta.

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And when Gamma is high, their hedges become more reactive. If Gamma is high, Delta changes quickly as price moves. So dealers must constantly adjust their hedges, which translates into buying or selling future or the underlying. As a result, this creates more flow which can amplify price movement. Market becomes less stable, more volatile, especially near key strikes or expirations.

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So when Gamma is high, dealers have to hedge more aggressively, which can move the market. On the other hand, if Gamma is low, Delta changes slowly even if price moves. So dealers don't need to hedge as aggressively. This leads to less flow and calmer market behavior. Price action is usually more stable with less noise.

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To simplify it even more, high Gamma zones can trigger big moves or sharp reversals. While low Gamma zones tend to be more range bound or stable. Now let's look at how traders can use Gamma. We can use Gamma to spot potential breakouts or reversal zones. If price breaks through a high Gamma level, dealers may be forced to hedge quickly and amplifying the move Gamma also allows us to identify where price could get pinned.

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When Gamma is high and price sits near a major strike, edging pressure can balance out and keep price locked in. This is a common behavior near the expiration. Then we can use Gamma to improve entry timing and risk reward. Because knowing where Gamma is concentrated helps you avoid bad entries and positions where flow may support your trade. Finally, it can help traders to anticipate volatility.

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Understanding where the market is positioned helps you prepare, not react. Let's take a closer look at how Gamma behaves around strike prices and as we get closer to expiration. Options that are at the MONEY or ATM have the highest Gamma. That's because they are the most sensitive to small price changes in the underlying. Just a small move can push them in or out of the money very quickly.

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So what does that mean? It means that Delta changes fastest at the money. And that requires dealers to hedge more aggressively when price is near these levels. As expirations approaches, Gamma increases sharply, especially for at the MONEY options. This makes option even more reactive to price and causes market makers to make quicker and larger hedge adjustments to stay covered.

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That's why we often see more volatility and sharper price Reactions around major strikes near expiration is not random. It's direct results of rising gamma and hedging pressure. So when you combine at the money strikes with imminent expiration, you get the perfect setup for fast dealer driven moves. And that's exactly what smart traders watch for. But this is not it.

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There is one more piece of the puzzle the futures traders need to be aware of. 0dte's options or options that expire on the same day. Over the past few years, zero DTEs have exploded in popularity. And while they may look like short term noise, they can actually have a huge impact on intraday price action. Especially when gamma exposure is concentrated around key strikes.

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0dt's options have very high gamma because they are at expiration and are extremely sensitive to small price changes. This means that even a tiny move in the underlying can cause big shift in delta. And that forces dealer and market maker to hedge quickly and and aggressively in real time. That aging flow can create intraday support resistance or sharp directional moves for futures traders. 0dts gamma levels can explain why price gets pinned intraday, why breakouts accelerate, or why reversal happens fast and without news.

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That's why at Mentor Q we include daily 0 DTES gamma levels. So you can track these flows, anticipate volatility shifts and manage risk with precision and even on the shortest time frames. Now that we understand what gamma is and how it behaves near expirations and how the money strikes, let's take it a step further by looking at the overall gamma exposure in the market and why this concept is so critical for traders. The gamma of an option can be positive or negative depending on whether you are long or short the option. If you are long an option or you buy an option, whether it's a call or a put, your gamma is positive.

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If you are short an option or sell an option, whether it's a call or a put, your gamma is negative. At Mentor queue, we calculate net gamma exposure by analyzing the full option chain and running it through our models. This gives us a clear view of whether the market is in positive or in a negative gamma regime. But why is this important? As we explained earlier, market makers hedge delta.

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They constantly adjust their exposure by buying or selling the underlying asset or futures based on on our delta changes. And since gamma measures how fast delta changes, it directly impacts how aggressively market makers need to hedge. The net gamma exposure, positive or negative, determines how this hedging flow behave. And that has a real consequences on price action, especially in futures. This is why every futures trader should understand this Principle.

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It helps you see not just where the price is but how and why it may move. Next lets simplify this. In a positive gamma environment the market is net long options meaning that more options have been bought than sold. And what does this mean for market makers behavior? Market makers hedge by buying when the market drops and selling when it rises.

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This keeps them delta neutral and their hedging flow acts as a dampener on price volatility. The result, intraday volatility is lower. And if you are a futures trader, knowing this before the market opens gives you a major clue. Now let's flip it. In a negative GAM environment the market is net short options meaning that more options have been sold than bought.

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In this case market makers hedge by doing the opposite. They sell when the price drops and they buy when the price rises. This means that their hedging amplifies move instead of softening them. The result? More volatility, faster moves and bigger swings.

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For traders this environment can lead to trending days whipsaws and increase intraday risk. But if you know you are in a negative gamma regime, you can adjust by staying flexible, expand your targets and be prepared for fast flow driven action. Knowing whether the market is in positive or negative gamma is like knowing the mood and the sentiment of the market before it moves. If you trade futures and you ignore this, you are flying blind. But if you know how to use it, your align with how the flow is likely to behave and that's a real hedge.

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Now that we understand what gamma is and why it matters, let's talk about how we made it practical and actionable. Inside Mentor Q At Mentor Q, we've developed a proprietary quant model to track gamma exposure and gamma levels designed to take complex option data and turn them into clear actionable levels that traders can use every day. We cover 1300 assets and this includes stocks, ETFs, indices, crypto and futures. Mentor Q is the only company that we are aware of that provides gamma levels on futures by looking at futures options and soon we will be releasing gamma levels on spot crypto options within the futures space. We cover 25 different futures contracts including index futures like ES and Q, Dow and Russell, commodities like crude oil, natural gas, metals like gold and silver, copper, REITs, forex, soft commodities and crypto.

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These gamma levels can help traders anticipate key inflection points in price, identify where market makers may need to hedge aggressively and spot hidden support and resistance not visible in the chart. These support and resistance areas are calculated using forward looking option data and not past Price action. That is where the power comes in. The Mentor Q gamma levels can be divided into primary levels and secondary levels. But let's start with the primary levels.

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Lets start with our core resistance level. This is a strike with the highest net call gamma exposure. This is the price level where there is more cold jacks. If we look at the Mentor Q net gamma exposure chart, the core resistance is the level where we see the widest green bar. When the market approaches the core resistance level, two common scenarios can play out.

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The first one is a rejection or a pullback. This level often act as a strong resistance. Not just technically but structurally. It's where a large number of investors hold call positions and where market makers are heavily hedged as price. Near this level, dealers who are in a long gamma position start to sell the underlying to stay delta neutral.

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This selling pressure often causes the market to stall or pull back. Also many traders may close or take profit on their calls at these levels which triggers dealers to unwind their long hedges adding more downside pressure. Then we have a second scenario where the core resistance acts as an inflection point. If the market is very strong, the bulls may roll their call position to higher strikes effectively shifting the core resistance level upward. When this happens, market makers need to adjust their hedges and price continues to rise towards the new strike.

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They may start buying again and stay hedge which can push the market even higher. We then have our put support level. This is a strike price with the highest net put gamma exposure. If we look at the Mentor Q net gamma exposure chart, the put support is the level where we see the widest red bar when price moves down towards the put support level. It's a key moment for traders, especially in futures.

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This level represents the strike with the highest net put gamma exposure which makes it a zone of heavy dealer hedging and and investor positioning. Here we can see two main scenarios that typically unfold. The first one is a bounce to the upside. The put support level often act as a floor in the market or a support. But why?

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Because it's where dealers are heavily short due to put hedging as price drops. And these puts go deeper in the money dealer hedge by shorting the underlying. But at some point the put holders monetize and they start closing their positions. When that happens, dealers also close their short hedges triggering a buying flow and that often leads to a bounce in price. This is why the put support level can act as a strong technical support zone, especially intraday or near expiration.

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The second scenario is when the put support acts as an inflection point for a downside move if the market doesn't bounce or after puts are closed, investors often roll their hedges. They can do this in two ways. Roll higher if they think that the bounce is sustainable and want protection closer to the new price or roll lower if they expect more downside and they want protection at deeper levels. If edging resumes at the lower strikes, the put support moves down. That introduces new selling pressures as market makers begin shorting again.

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In this case, the put support level shifts and becomes a bearish force dragging the market lower. So the put support levels helps you identify where the downside might slow or reverse. It also shows you when a bounce might be temporary and new hedging could shift momentum again. Monitoring this level gives you insight into how dillar are positioned to the downside which directly impacts future flows. The third level is the high volatility level or HVL and is one of the most important levels in the Mentor QGamma model.

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It represents a transition zone, the point when the relationship between the price and gamma exposure changes. In simple terms, it helps you understand whether we are in a positive or negative gamma regime and whether market maker hedging will stabilize or amplify price movement. The high volume level isn't just about where gamma flips from positive to negative, but it marks the inflection point in the slope of the cumulative gamma exposure curve. The curve shows how the net gamma builds up across all strike prices. Here's what it above the hvl, the cumulative gamma curve slopes upwards.

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As price rises, so does net gamma. This tends to count price movement and hedging flow absorb volatility. Below the hvl the slope turns downward. As price rises, gamma actually decreases which can make market less stable and more volatile. So the HVL shows you where momentum could shift and where dealer hedging behavior may change direction.

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The HIV level gives traders key insights. Understand momentum before it happens, anticipate shift in volatility based on dealer hedging behavior and it can help us adapt our strategy. For example, above the HVL we can maybe look at reversion setups while below the HVL we can be ready for trend and breakouts environments. Think of the HVL as a regime change. It tells you if the market is moving into a phase of control flow or chaotic momentum.

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In addition to our primary gamma levels, we also provide a dedicated view for zero DTE's levels, I.e. the core resistance, put support and hybrid level based only on the option that expire Today. Why does this matter? Because as we mentioned before, 0dt's options have the highest gamma sensitivity. The delta of these options changes very fast and that means that market makers must hedge aggressively in real time, often using futures.

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And this flow can have a powerful impact on intraday price action. By isolating just the zero dt expiration, we strip away long dated noise and focus purely on today's flow, the one that most likely impact immediate price behavior. Then we can look at the one day expected move indicator at Mentor Queue we created the one day expected move indicators to help traders define a daily price range based on implied volatility. This tool is designed to answer one key question every trader has before the market opens. What's the expected range for tomorrow?

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So we have two levels. The one the max which is the upper range of where the price is expected to go tomorrow and the one the mean which is the lower range of the expected move. These levels are calculated using forward looking volatility assumptions from the option market and they provide powerful insight into what the market is pricing in. It's not about predicting direction, it's about understanding expected movement and that makes it incredibly useful for risk management, trade planning and strike selection. We have backtested the one day expected move and the data is compelling.

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When the price exceeds the one day max, there's a high probability it returns back inside the range before the end of the day. When price remains within the one DMin and Max, it becomes a strong tool for building neutral range bound strategies. The backtesting results of this indicator is available within our website. So how can we use these levels as futures traders? Before the session begins, you know the projected high and low range.

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This gives you a clear sense of where the market is likely to stay contained, where price is stretched and due for a pullback, or whether the day has a potential to be a range bound or directional. For example, if price moves towards the one day max early in the session and there is no real news or strong catalyst, it may signal overextension. So you can look for reversal setups or fading opportunities. Always confirm that with option flow and gamma levels we can use this indicator to place tighter stops outside the range. For example, if the price breaks outside the range and holds, that tells you something.

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The market is likely trending and you are in momentum date. We can then use this level as our profit targets. Instead of guessing, we can use our one day expected move to set measure targets on intraday trades and avoid getting chopped in low volatility sessions. Take a Look at these two examples on ES and NQ. These were the levels for 4-2-2025 right before the reciprocal tariff were announced.

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We see a strong move from the 1 the mean to the 1 the max both on ES and NQ. This was a 500 plus points move on NQ and 130 plus points on ES. The levels provided us with a clear reversal area and profit target. Now let's look at the secondary levels JAX1 to JAX10. JAX level 1 to 10 show the top 10 price levels with the highest gamma exposure after the main levels like the put support and core resistance.

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JAX level 1 has the highest net gamma followed by JAX 2, JAX 3 and so on down to JAX 10. These levels help traders spot intraday support, resistance and reaction zones as market makers may hedge more aggressively around them. To recap, we have seen the importance of gamma levels and how we can leverage them to build an edge. Gamma levels help future traders see where the real flows are likely to enter the market before they show up in the chart. By tracking option positioning drives, dealer hedging gamma levels reveal hidden support, resistance and volatility triggers, giving you a powerful framework in timing, risk management and trade selection.

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Gamma levels show where the market is likely to speed up or slow down based on dealer hedging. This helps you prepare for momentum days or mean reverting setups. Levels like Put Support, Core resistance and HIVAL level act as magnets for price. These are areas where future traders can expect order flow to cluster, making them ideal for entries, exit and managing stops. Gamma levels reflect how dealers and institutions are positioned.

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Trading with this awareness helps you avoid getting caught on the wrong side of flow and instead align your trades with the real forces moving the market. Mentor QGamma levels and volatility models are fully integrated with leading platforms like NinjaTrader, making them easy to access and apply in real time. Through this integration, traders can overlay mentor QGamma levels directly onto their charts. This allows for seamless decision making during live market conditions without the need of manually interpret raw data. It bridges the gap between institutional level analytics and retail execution, giving traders a smarter way to trade the flows.

[00:21:09.24] - Speaker 1
By subscribing to Mentor Q, you can access all our trading indicators and connect our data into your chart. Let's quickly recap. In this session you discovered Option Flow Dry's future price action and the importance of gamma exposure. We covered how gamma levels act as flow based inflection points, not just technical levels and we showed some examples on how to leverage them. You also saw how tools like zero ETs levels the one day expected move and JAX level can help future traders anticipate volatility, define structure and time entries using the data driven approach and that's the core of why we built Mentor Queue to give independent traders access to the same insights, models and tools used by institutions without the complexity or cost.

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We believe that data should empower and not overwhelm. That's why we've made these gamma models accessible through platforms like ninjatrader, so you can plot real institutional levels directly onto your chart and act with confidence, not confusion. If you are trading futures and you are not watching option flow, you are trading blind. But once you understand how Gamma and dealer positioning shape the market, you unlock a new hedge. You can spot hidden support and resistance, you can anticipate volatility shift before they happen and you can align with the real forces moving the price, not just lagging charts pattern thank you for spending time with me today and I hope this session gave you a fresh perspective and real tools that you can apply immediately in your trading process.

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Be sure to explore the rest of our video series and dive deeper into the models inside Mentor Queue. If you want to learn more about our approach and models, follow [email protected] Sam.