Gamma Levels

In the last few years, Gamma and Gamma Exposures have become increasingly important for traders and risk managers. Post COVID-19 option volumes have increased exponentially, becoming an important flow in markets. These new flows, as you will discover following us, are an “hidden” force in the market. 

By understanding how Market Makers manage this new risk a trader can get reliable and actionable data that can give you a market edge. This is also what we are looking to track by using our Q-Models.

Why is this important?

Because of this market shift now the options market has become increasingly important for different reasons:

• The increase in option volumes can increase or reduce liquidity in the market.
• Being able to track that liquidity can give us an edge and increase our profitability.
• Increase of option volumes creates technical moves in the market because of how market makers have to hedge their book. These technical moves can be determined by looking at the options greeks. Let’s start from gamma.

Check out our Video Tutorial on Gamma Levels.

Download the Presentation of the Video.

What are Gamma Levels?

Gamma Levels are price zones derived from options positioning—specifically from gamma exposure. They reflect where dealers and market makers are likely to hedge aggressively based on their options exposure.

At MenthorQ, we analyze the entire options chain for each underlying asset, compute gamma exposure across all strikes and 0DTEs, and map out key levels that indicate where market flow is likely to react.

These levels are not based on price history like technical indicators. Instead, they are forward-looking—based on where the market is structurally positioned from a dealer’s perspective.

Why is Gamma so important?

So why is gamma such a powerful concept for traders—especially those trading futures or intraday setups?

Gamma is the second derivative of an option’s value. It measures how fast Delta changes as the price of the underlying asset moves.

That matters because dealers and market makers hedge their Delta exposure using the underlying asset—often futures. When gamma is high, their Delta changes rapidly with price—and that means they must hedge more aggressively.

In the slide below we show how market makers are hedging investors positions based on whether we buy or sell options. Market Makers are not in the business of taking risks so they need to offset their exposure by hedging the change in delta.

This hedging activity creates real buying or selling pressure. It can:

• Amplify price moves near expiration or key strikes
• Stall price when hedging balances out
• Trigger sharp reversals when gamma flips from positive to negative

So now we know that the options volume is at the highest it has ever been, we know that on the other side of most options transactions we have market makers and we know that market makers are buying or selling the underlying asset to cover their exposure. They keep buying and selling based on the change in Delta.

Gamma is key as it tells us how fast delta changes and it can help us understand if market makers need to hedge more aggressively.

Why are Market Makers exposed to Gamma?

Market Makers are exposed to gamma because they take the opposite side of that gamma profile you saw in the previous tweet. If we are able to follow that gamma, we have a better understanding of how market makers will have to delta hedge.

Understanding gamma means you can anticipate how price might behave around key strikes—not just react to what you see on a chart.

Gamma explains why:

• Price gets pinned near a strike into expiration. When gamma is high and price sits near a major strike, hedging pressure can balance out and keep price locked in—a common behavior near expiration.
• Breakouts accelerate without news
• Reversals happen intraday with no catalyst

We can improve entry timing and risk/reward. Knowing where gamma is concentrated helps you avoid bad entries and positions where flow may support your trade.

Net Gamma Exposure (Net GEX)

This is why MenthorQ focuses on Gamma Exposure. It gives you a lens into market mechanics—and reveals the pressure behind price. With Gamma Levels, you’re not just looking at candles. You’re seeing what’s driving them.

Before we move into Gamma Levels we need to explain a few additional concepts that will be key to understand the importance of Gamma.

We start with the Net Gamma Exposure Chart. This is one of the most important models at MenthorQ and can be found in the dashboard for every asset.

The Net GEX chart visualizes the distribution of gamma exposure across strike prices:

• Green bars show net call gamma exposure
• Red bars show net put gamma exposure

The widest bars point to the strikes where dealers are most exposed—these become our Call Resistance and Put Support zones.

This chart gives us a structural map of market pressure:

• Where flow is likely to reverse
• Where it may accelerate
• Where pinning behavior could trap price near key strikes

The GEX chart isn’t just visual—it powers our level models. It shows you what the market structure is—not just where price has been.

How do Market Makers hedge in Positive or Negative Gamma

We have a separate article that describe Delta Hedging and how Market Makers Hedge in Positive and Negative Gamma. You can access the articles using the links below:

• Delta Hedging
• Positive and Negative Gamma

Let’s look at the difference in Hedging between the two regimes:

• In Positive Gamma the market maker buys when the underlying falls, and goes short when the underlying goes up. This suppresses volatility and keeps the market in ranges. In these cases we often witness slow rising markets or sideway moves.
• In Negative Gamma market makers hedge by selling the underlying when the price falls and going long when the market moves up. This naturally increases volatility as it accentuates market moves. This is when you see large directional moves.

Want to learn more about our Gamma Levels?

• Access the Gamma Levels Course in the Academy