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GEX

SPX 30min Chart with GEX Levels & Major Piviot pointsAnalyzing the major pivots in a top-down approach in the context of trading volatility, and aligning them with TradingVolatility's calculated cumulative gamma levels, particularly focusing on the highest three expiration strikes, offers valuable insights into market dynamics and risk management. 1.Top-Down Approach: The top-down approach involves starting with a broad view of the market and then drilling down into specific details. In the context of trading, this might mean beginning with a macroeconomic analysis, industry analysis, or a broad market overview before delving into individual securities or specific trading strategies. This approach helps traders gain a comprehensive understanding of the overall market conditions. 2. Major Pivots: Major pivots refer to critical points or levels in the market that often act as turning points for price action. These could include support and resistance levels, trendlines, or significant historical price points. Traders use these pivots to make decisions regarding entry and exit points in their trading strategies. 3. TradingVolatility's Calculated Cumulative Gamma Levels: TradingVolatility appears to be a tool or platform that provides data and insights related to options trading, including the calculation of cumulative gamma levels. Gamma represents the rate of change in an option's delta concerning a change in the underlying asset's price. Cumulative gamma levels can indicate the overall sensitivity of a portfolio to changes in the underlying asset's price. Traders use this data to assess risk exposure and to make informed decisions. 4. Highest Three Expiration Strikes: Options have various expiration dates and strike prices. The highest three expiration strikes refer to the options contracts with the most significant open interest or trading activity. These are often the ones that have the most influence on market dynamics and can be crucial in managing options portfolios. Now, let's put these elements together: By employing a top-down approach, traders start with a macro-level analysis of the market. They then identify major pivots, which could be key support and resistance levels, trendlines, or important historical price levels. This step helps traders establish the broader context for their trading decisions. Next, traders use TradingVolatility's calculated cumulative gamma levels. These levels offer insights into the sensitivity of their options portfolios to changes in the underlying asset's price. By aligning these gamma levels with the highest three expiration strikes, traders can gain a clearer picture of their risk exposure and the potential impact of major market movements on their portfolios. For instance, if the cumulative gamma levels are high near these critical pivots, it suggests that options traders have substantial exposure to potential price swings in the underlying asset. This information can guide traders in making decisions about risk management, such as adjusting their positions, implementing hedges, or selecting strategies that align with their risk tolerance. In summary, a top-down approach, combined with a focus on major pivots and cumulative gamma levels of the highest three expiration strikes, provides traders with a well-rounded perspective on market conditions and risk exposure, helping them make more informed trading decisions and manage their portfolios effectively.
AMEX:SPY
by thebearfib
3
What is GEX?Gex is short for Gamma Exposure. I started tracking gamma exposure over a year ago. In fact I posted an idea with a really good explanation idea of gamma exposure but the idea was banned and I never got around to reposting. So many private messages asking me to explain GEX, I decided to repost the banned post without the restricted content in it. If you want the restricted content, send me a message and I will send you the link ==== Original Idea posted March 6th 2022 ======== I finished updating the simple GEX tool. This tool is for educational purposes only and gives a very basic/naive overview of gamma exposure for any Ticker. So What is GEX? GEX stands for Gamma EXposure. Options are derivatives of financial assets that give investors more.. options. Gamma is the rate of change in an options delta per 1-point move in the underlying asset's price. When someone buys an option, there is typically a market maker (dealer) that needs to sell that option to you. Because the dealer does not want to take directional risk on the other side of the option, they hedge the option by buying or selling the underlying asset. As the price changes, the dealer must continuously make changes to that hedge to remain delta neutral. Gamma Exposure, in this tool's case, Naive Gamma Exposure is an estimated measurement of gamma exposure that a dealer has taken on based on the full options chain's open interest. It is an estimate because nobody really knows if an option's open interest was bought or sold to a dealer. Negative\Positive Gamma is hedged differently by dealers. If a dealer is positive gamma they will sell the rally (price up) and buy the dips (price down). Positive gamma creates a supportive and less volatile, more liquid market. If a dealer is negative gamma they will buy the rally and sell the dips. Negative gamma creates more selling pressure and more volatility, an illiquid market. Zero Gamma or Gamma Flip is the assumed point at which dealers would flip from negative gamma exposure to positive. When the dealer is positive gamma, the Zero Gamma strike will usually act as support. When the dealer is negative gamma, the Zero Gamma strike acts as resistance. GEX can measure individual asset gamma exposure but is more effective at measuring overall market indexes such as SPX and NDX. GEX shouldn’t be used as a directional measurement, but more of a volatility indicator. Notional GEX is the dealers notional (total dollars) exposure in 1% move in the underlying assets price. If SPX is -20B for example, dealers will have to buy 20 billion in underlying shares for every 1% move up, or sell 20 billion for every 1% move down. Option Quotes are delayed by 15 minutes from the open and close of the Regular Trading Hours. Disclaimer: The GEX tool is meant to be used for educational purposes only. It is NOT meant to be used for/as financial advice. Use at your own risk. The reason I included the JHEQX HEF Pin is because of how the different expirations effect the markets at different times. The general idea I like to emphasize in my naive understanding of these market mechanics is TIME. Notice in the following ideas from the past 3 months all have the 4165 HEF Pin in the forecast. This is only possible by calculating the Gamma Exposure of the options sold to JPM and making some assumptions (next time).
SP:SPX
by SPYvsGME
51
A Put Spread Collars Gamma IndicatorWhat is a Put Spread Collar? A put spread collar is an options strategy used to insure underlying assets from downside while limiting upside. Why would someone use a Put Spread Collar? What is unique about this strategy is the premium is paid for by selling an 5-6% OTM call and selling at 20% OTM put. Selling those 2 options pays for the long put premium. Why do I care about these Put Spread Collars? These strategies are insurance for over 30 billion dollars of assets. A market maker selling this option strategy will not take that risk so they need to constantly dynamically hedge the risk. Dynamically hedging billions of dollars worth of options will cause considerable flows positive and negative in the market. What do you mean 'Flows'? It's not really a flow but you need to understand how a market maker dynamically hedges to get a better picture. For the scope of this indicator I will only use "flows" to describe dealers buying and selling. I'm currently working on an indicator to track dealer flows. est. 2-4 more weeks. When are flows the strongest? Typically flows will be the strongest in the last 3 weeks prior to expiry. Flows will increase and decrease from Implied Volatility depending on gamma direction being positive or negative. Increased gamma is indicated by larger sized bubbles. What is GEX? GEX is short for Gamma Exposure. When a market maker sells an option they are at a direction risk if the underlying price goes up or down. To remain risk free, market makers will buy or sell the underlying the amount of delta of an options contract. Gamma is the delta Change in from the underlying price moving up or down. What is Positive and Negative Gamma? Each bar on the indicator will calculate the Gamma of the total option strategy. This is the amount of delta a dealer will need to hedge per 1 point move in underlying. If the overall gamma is positive, the dealer flows are supportive (i.e. Sells highs, Buys lows). if the overall gamma is negative, the dealer flows add to volatility (i.e. Buys Highs, Sells Lows) Script will be published next week. I still have some issues with fix with implied volatility.
SP:SPX
by SPYvsGME
12
1 and a 2 and a 3...1.. double bounces on Ichimoku Cloud. 2.. Weekly Tenkan-Sen crossing over Kijun-Sen. and a 3... Chikou Span crossing over prior price confirming trend. 21D moving average on GEX flatlining Wheat prices, hope you don't like bread. Oil prices, hope you like being stuck at home. Nat Gas, hope you have a wood stove next winter. Vodka losing their damn minds. This month choices of FUD include: Nuclear Meltdowns MAD - Mutual Assured Destruction Futures Roll CPI data FOMC rate hike Quad Witching and last but not least Negative Gamma Exposure for everyone!!!
AMEX:SPYShort
by SPYvsGME
1
2.2 Billion Reasons to be short this market in march.I'm going to breakdown JPM big 20 billion dollar Put Spread Collar Hedge trade early this quarter. The trade usually gets a lot of attention when they do the roll/reset on the day it expires each quarter. For the uninitiated, this trade occurs every quarter by JPM as a premium neutral hedge (market crash protection) for a 20B fund. Furus try to explain the delta of it on the day of the trade, but that is not where this trade interests me. If you follow Gamma and Vanna Exposure of the options world, you would likely know on any given day if the market is currently positive or negative gamma exposure. You may follow Cem Karsan on twitter like I do and know about Gary and his Bananas or more recently Vanna. This trade is often a focus on Cems threads when it approaches expiry and I think I finally figured out how to measure its effects on the market. Here is a graph of the a 21 day moving average of Gamma Exposure. pretty neat how something as random as the stock market can provide such a recurring pattern. This idea is just a primer for 21DMA GEX, I'll be following it up in the next few weeks with numbers behind it and how I plan to trade this very cyclic pattern. Trade Safe. Not financial Advice, just Mad Magazine Data Science.
SP:SPX
by SPYvsGME
4
Bear Flag vs Bull TrapLast 2 weeks have been bearish through APPL and TSLA earnings. Attention now turns to Amazon earnings (feb2) as they teeter on oversold RSI and below 2yr support. Not regaining this support from bad earnings will likely see this S&P bearish flag breakout to the downside. Canadians wielding pitchforks and torches, Russia and nato saber rattling and China facing off with covid olympics, I’m not feeling too bullish this week. There were some positive flows in futures Friday morning that ended with a strong rally to end the week in a better position for a gap up Monday to lower negative gamma range above 4475 and a floor of 4400. Gamma Exposure (GEX) from SPX options tool I created on my website. Head over to www.spyvsgme.com for delayed quotes (15-min delay from CBOE). I’ll be adding more information as I create more options indicators going forward. I’m going to be cautious and enter a short below 4300 on heavy selling, otherwise I think the market waits for AMZN earnings for guidance in the 4475-4400 range. Not a very high likelihood of this bearish flag playing out, but with all the damage done to markets the last 2 weeks I’m staying mostly liquid and riding the waves up and down. >>Not Financial Advice.<< I have never solved the rubik’s cube.
CME_MINI:ES1!Short
by SPYvsGME
3
Storm Over?I updated the GEX indicator this morning to include puts & calls so you can visualize the changes in gamma exposure. If you want to see other tickers, head on over to www.spyvsgme.com . Once I’m happy with the indicator I will publish the source code. What I keep seeing is the puts building up lower (80 strike) bringing down the gamma zero strike which is now dropped to 100. With prices creeping up back over 100 yesterday, it could mean less volatile price movement as positive gamma exposure is typically less volatile. Keep in mind, the overall SPX & NDX are still in very negative gamma so it's likely there will be more choppy waters ahead. This leads to great opportunities for traders with their head & shoulders upside down. Yesterday the intraday on SPY presented an inverse head and shoulders that paid out exactly to the 161.8% fib extension. Futures are all over the place this morning. GME seems to be weathering the storm. It's kind of poetic, that nearly 1yr ago, I was mocked for telling everyone on WSB that I thought the fair value for GME was $100 given everything that happened. One interesting development I noticed yesterday was CHWY was positive and ran 13.7%. Curious what the sentiment shift is in relation to GME anniversary. Is it possible shorts were covering to balance losses in other tech like NFLX and AMZN? It is an interesting correlation to say the least. Not financial Advice.
NYSE:GMELong
by SPYvsGME
2
Da Bears Head & ShouldersA bearish week is an understatement for how much and how quickly the markets turned and broke the bottom of a 2 yr bull trendline. If you read my bear review for Jan, I identified how important this last OPEX cycle was going to be. What I discovered last week was that the indexes crashed through a significant gamma zero line when FOMC (JAN5) indicated more rate hikes this year. You can find these key gamma levels using a GEX tool I created at www.spyvsgme.com GEX can be calculated using the options chain. In this case, SPX options are used to hedge dealers exposure to the trades they sell. A significant pattern I missed last week was this H&S pattern with a retest of the neck line and a bounce and rejection of the 161.8% fib. Overnight Bitcoin followed suit and tested its H&S 161.8% target. Doesn’t matter if you are a bull or a bear, be careful out there. BULL CASE If you’re a bull, you’re looking for a strong reversal here at the 200% and a retest of the 161.8% at 4435. Win that and we could see a V-shaped recovery and regain positive gamma on the SPX ~4595. BEAR CASE The indexes are extremely oversold now so even a bear would expect a period of distribution before another move lower. If you look back in March of 2020 you will see after the first week of the correction there were several quick moves up before continuing down. The 4350 strike on SPX seems to have the lowest Call exposure and is likely where pinning of the indexes will be through this next FOMC in a few days. Basing here for 2 days before a break lower is the most likely scenario. Either case is very difficult to predict as unexpected events now would be a cause for a market crash. Not financial advice. I’m a meat popsicle.
CME_MINI:ES1!
by SPYvsGME
GAMMA GAMMA GAMMA GAMMELEONBoy George this week has been nuts. I haven't had as much time to work on the GEX tool as I had hoped but I did get some work done on testing it. Check it out at www.spyvsgme.com A lot of gamma exposure rolled off this week and brought the gamma zero strike from 140 down to 125 and a 2.3M GEX. Price target of 125 this week seems reasonable as total GEX has rolled positive. Could see some relief rallies next week in the indexes as a metric ton of negative gamma exposure rolled off indexes and big names like Tesla. Gamma Zero targets for next week look this GME 104 -> 125 TSLA 936 -> 1045 AAPL 161 -> 165 SPY 437 -> 465 FOMC next week, if JPow remains hawkish we could see even deeper sell offs on indexes. In that case I would be looking for lower targets. SPX still has nearly -1B GEX GME 104 -> 100 TSLA 936 -> 900 AAPL 161 -> 160 SPY 437 -> 425 Not financial Advice. Just GEX
NYSE:GMELong
by SPYvsGME
1
GME vs GEXYou may have heard about this greek called Gamma. If you haven’t, I’m not going to talk about it much except to tell you that it's important. I told you I would do something special for my 1yr GME anniversary, so I took to coding up a Gamma exposure tool (GEX) that I will be giving out for free once I get it tested next week. The tool is simple enough but will provide GME traders with some important levels. The levels are based on Gamma exposure from options and identifying where gamma flips from negative to positive. It's nothing new, but access to an entire Options Chain and being able to calculate the gamma exposure is something most alpha providers hide behind a paywall as some secret sauce to get you to pay for a subscription. That's not me. I think all information regarding a stock should be accessible to everyone, particularly the less wealthy traders like us gamers. Why is GEX important? Gamma exposure is important because it acts as a driving force for underlying assets. That is to say, when a market maker's exposure to an asset is overly positive, the dealers will sell into a rally and buy into dips, inversely, when the mm is negative gamma, they will buy into a rally and sell into a dip. It’s safe to assume once the mm exposure to that asset is negative like it is with GME below 140 gamma flip, you’re likely to get more volatility. Usually this gamma zero acts as a type of support for an asset, but if you have been living under a rock, you may not have heard the shifting sentiment in the marketplace moving to a more risk-off appetite. It's why you see shares of VIAC rising and our beloved GME breaking the gamma zero support and turning much more negative. The bad news is, there is a rather large negative exposure to GME at 100, something to the tune of -1.6million that seems to be the likely drawdown. I still need to verify my gamma exposure numbers and make sure I’m not missing anything. Something tells me the ETFs that include GME may offer some more gamma exposure I’m not seeing. Either way, next week I will open-source the code and publish the tool/data to be verified. I will then attempt to make sense out of ETFs affecting this recent drawdown. As always, not financial advice. I’m a meat popsicle and…
NYSE:GMELong
by SPYvsGME
7
Ready for a Big Correction? US30 - SPX500 - NDX 15/4/2021We've been seeing a huge rise in the Dow Jones, now it needs a breather so I'm trying to enter a short after a possible stop hunt to the upside, right around 34k. The market is driving through a bunch of potholes with fears of QE ending. Powell mentioned the FED will taper QE before they hike rates, hedge funds with exposure to quadrillions in the derivatives bubble, system risk at an all-time high. GEX at an all-time high too, dark pools getting in on the Short of the Century? What do you think? Will it go parabolic instead?
OANDA:US30USDShort
by PrecisionCharts