Gamma Exposure (GEX) - A Data Driven Guide
Summary
TLDRDieses Video bietet eine umfassende Diskussion über Gamma-Exposition in Optionshandel, einschließlich weniger bekannter und populärer Meinungen zur Nutzung von Kamera- und Spiel-Exposition. Der Sprecher erläutert, was Gamma ist, wie man Gamma-Exposition berechnet und warum sie wichtig ist, im Gegensatz zu Delta-Exposition. Es werden auch die Auswirkungen von Gamma auf Aktienpreise und Volatilität diskutiert, sowie die Bedeutung von Marktmakler-Positionierung und dynamischem Hedging. Der Schwerpunkt liegt auf der Analyse von Gamma-Exposition für den S&P 500 (SPY) und wie sie für Trading-Strategien genutzt werden kann, unter besonderer Berücksichtigung von 'illiquiden Zonen', die schnelle Preisbewegungen ermöglichen.
Takeaways
- 📈 Gamma ist die Veränderung der Delta eines Options-Kontrakts, wenn der Aktienkurs sich bewegt.
- 🔢 Gamma-Exposition misst die Gesamtgamma einer Aktie, indem man die Gammas der Kontrakte mit dem offenen Interesse multipliziert.
- 🤔 Delta-Exposition wird oft diskutiert, aber Delta wird sofort ausgeglichen, während Gamma sich im Laufe der Zeit ändert und ist daher wichtiger für Marktteilnehmer.
- 💡 Die Verwendung von Gamma-Exposition kann Einblicke in Marktbewegungen geben, insbesondere in Bezug auf sogenannte Gamma-Squeezes.
- 📊 Die Analyse von Gamma-Exposition unterscheidet sich je nach Aktie, da jeder Aktienmarkt seine eigenen Mustern und Reaktionen auf Gamma-Veränderungen hat.
- 📉 Ein negatives Gamma kann zu einem Momentaneffekt führen, während ein positives Gamma eine Stabilisierung oder Rückführung des Preises bewirken kann.
- 📈📉 Die Verwendung von Gamma-Exposition zur Vorhersage von Volatilität ist nützlicher als die Annahme, dass sie den Richtungsweg des Marktes vorhersagen kann.
- 📊 Die Darstellung von Gamma-Exposition in einem Diagramm ist sinnvoll, um zu visualisieren, wann der Markt aufgrund von Gamma-Effekten eine höhere Volatilität erwarten kann.
- 🤖 Die Erstellung automatisierter Handelsstrategien basierend auf Gamma-Niveaus kann erfolgreich sein, muss jedoch sorgfältig mit anderen Marktfaktoren abgewogen werden.
- 🕊️ 'Illiquid-Zonen', in denen die Gamma-Exposition gering ist, können als Bereiche interpretiert werden, in denen der Markt weniger von Marktmacher-Hedging beeinflusst wird und daher freier bewegt.
- 🌐 Die Verwendung von Gamma-Exposition als Handelswerkzeug erfordert eine gründliche Analyse und Verständnis der individuellen Charakteristika des jeweiligen Aktienmarktes.
Q & A
Was ist Gamma-Exposition und wie wird sie berechnet?
-Gamma-Exposition ist eine Maßeinheit für die Veränderung der Delta-Werte eines Options-Kontraktes im Verlauf der Veränderung des zugrunde liegenden Aktienpreises. Sie wird berechnet, indem man die Gamma-Werte der einzelnen Verträge mit dem offenen Interesse multipliziert und diese Werte summiert.
Was versteht man unter Delta-Hedging und warum ist es wichtig?
-Delta-Hedging ist die Praxis, eine Position zu neutralisieren, indem man die Delta-Werte von Optionen und die zugrunde liegenden Aktien in Einklang bringt. Es ist wichtig, um die Preisbewegungen zu begrenzen, die durch das Kaufen oder Verkaufen von Optionen entstehen können.
Was ist der Unterschied zwischen statischem und dynamischem Hedging?
-Statisches Hedging bezieht sich auf die anfängliche Positionierung, um die Preisbewegungen zu neutralisieren. Dynamisches Hedging hingegen erfordert, dass die Positionen der Marktschaffner angepasst werden, wenn sich die Delta- und Gamma-Werte im Laufe der Zeit ändern.
Warum ist Gamma-Exposition für Händler wichtiger als Delta-Exposition?
-Gamma-Exposition ist wichtiger, weil sie die dynamischen Veränderungen der Delta-Werte im Laufe der Zeit widerspiegelt, während Delta-Exposition nur die anfänglichen Verhältnisse abbildet. Marktschaffner müssen sich ständig an die Veränderungen der Gamma-Exposition anpassen, um ihre Positionen zu hedgen.
Was passiert, wenn die Gamma-Exposition für eine Aktie negativ ist?
-Bei einer negativen Gamma-Exposition werden die Delta-Werte der Händler kleiner, wenn der Aktienkurs steigt. Dies kann dazu führen, dass die Händler mehr Aktien kaufen müssen, um ihre Positionen zu hedgen, was den Aktienkurs unterstützt.
Was versteht man unter 'Illiquid Zone' und warum sind sie wichtig?
-Eine 'Illiquid Zone' ist ein Bereich, in dem es wenig Optionsaktivität und somit wenig Gamma-Exposition gibt. Diese Zonen können wichtig sein, weil sie schnelle Preisbewegungen ohne die Einmischung von Marktschaffnern zulassen.
Wie kann man Gamma-Expositions-Niveaus interpretieren?
-Gamma-Expositions-Niveaus zeigen an, wo sich die Gamma-Exposition für bestimmte Kursstufen befindet. Ein hohes positive Niveau kann ein Anziehungseffekt haben, während ein hohes negatives Niveau einen Abstoßungseffekt auslösen kann.
Was sind die Vor- und Nachteile des Filters für Gamma-Exposition, die innerhalb von 7, 15 oder 30 Tagen ausfällt?
-Der Filter kann helfen, sich auf kurzfristige Optionen zu konzentrieren, die stärker beeinflusst werden können. Allerdings ist der Hauptteil der Gamma-Aktivität bereits in kurzfristigen Optionen konzentriert, was den Wert dieses Filters möglicherweise reduziert.
Welche Rolle spielen Illiquid-Zonen in der Marktdynamik?
-Illiquid-Zonen können schnelle Preisbewegungen ohne signifikante Einflussnahme durch Marktschaffner ermöglichen. Dies kann zu einer erhöhten Volatilität führen, da die Preisbewegungen weniger von der Hedging-Aktivität der Händler begrenzt sind.
Welche 'unpopuläre Meinung' zum Gamma-Expositions-Niveau gibt es und was bedeutet sie?
-Die 'unpopuläre Meinung' ist, dass die Gamma-Expositions-Niveaus nicht immer die beabsichtigten Effekte wie Momentan- oder Mean-Reversion-Effekte auslösen. Dies hängt von der relativen Stärke der Gamma-Werte im Vergleich zum durchschnittlichen Gamma-Niveau des Marktes ab.
Outlines
📈 Einführung in Gamma-Exposition
Der erste Absatz stellt das Thema des Videos vor: Gamma-Exposition. Erklärt wird, was Gamma ist — die Veränderung der Delta eines Options-Kontrakts bei Veränderung des Aktienkurses — und wie man Gamma-Exposition berechnet, indem man Gamma mit dem offener Interesse multipliziert. Der Sprecher teilt seine Erkenntnisse und Meinungen zu dieser Thematik mit, die aus einer Datenanalyse resultieren und in der Hoffnung, dass es Einblicke für Anfänger und Experten enthält, die sie noch nicht kennt.
📉 Warum wir Gamma und nicht Delta betrachten
In diesem Absatz wird die Bedeutung von Gamma im Vergleich zu Delta erläutert. Delta repräsentiert die Rate der Änderung des Optionspreises in Relation zum zugrunde liegenden Aktienkurs, während Gamma die Veränderung der Deltas selbst beschreibt. Marktmacher delta-hedge ihre Positionen sofort, was bedeutet, dass Delta für sie keine Rolle spielt, sondern sie sich auf die Verwaltung von Gamma konzentrieren müssen. Des Weiteren wird erklärt, dass Delta vollständig gehedgt wird, während Gamma die Veränderungen verursacht, die Marktmacher zu dynamischen Hedges treiben.
🔢 Gamma-Exposition: Berechnung und Bedeutung
Der Absatz erklärt, wie man die Gamma-Exposition für einen Aktienmarkt berechnet, und warum dies wichtig ist. Es wird betont, dass die einfache Multiplikation von Gamma mit dem offener Interesse, um die Gamma-Exposition zu schätzen, nicht ausreicht. Stattdessen wird ein besserer Ansatz vorgestellt, bei dem die tatsächlichen Kauf- und Verkaufspositionen der Marktmacher berücksichtigt werden, um eine genauere Gamma-Exposition zu ermitteln.
📊 Analyse von Gamma-Exposition im Zeitverlauf
Dieser Absatz behandelt die Verwendung von Gamma-Expositions-Diagrammen, um den Marktverlauf vorherzusagen. Es wird erläutert, wie die Gamma-Exposition, dargestellt durch Balken, die Veränderung des zukünftigen Aktienpreises im Laufe der Zeit visualisiert. Der Sprecher teilt seine ungewöhnlichen Ansichten über die Auswirkungen von sehr negativer Gamma-Exposition auf den Markt, insbesondere im Hinblick auf liquide Indizes wie den S&P 500 (SNP).
📉 Verwendung von Gamma-Exposition für Vorhersagen
Der Fokus dieses Abschnitts liegt auf der Anwendung von Gamma-Exposition, um die zukünftige Volatilität des Marktes zu prognostizieren. Es wird erläutert, dass an Tagen mit nahezu null Gamma-Exposition größere Preisbewegungen erwartet werden können, was für Trader eine Gelegenheit darstellt, um größere Plays zu setzen. Der Sprecher betont, dass die Verwendung von Gamma-Exposition, um die Richtung des Marktverlaufs zu prognostizieren, nicht geeignet ist, sondern dass sie vielmehr für die Vorhersage der Volatilität verwendet werden sollte.
📈 Gamma-Exposition pro Kursschlag
In diesem Absatz wird die Analyse der Gamma-Exposition pro Kursschlag erörtert. Es wird erklärt, wie die Gamma-Exposition für verschiedene Kursschläge interpretiert werden kann, um zu verstehen, wann ein Kurs in Richtung eines bestimmten Kursschlages eine Schwerpunktbewegung oder eine Mean-Reversion-Wirkung erleben könnte. Der Sprecher teilt seine Einsichten, dass die Theorien über die Auswirkungen von positiver und negativer Gamma-Exposition nicht immer für alle Aktien gelten und dass es wichtig ist, die individuellen Profile der Gamma-Exposition für jeden Aktienmarkt zu betrachten.
🤔 Kritische Betrachtung der Gamma-Exposition
Der Sprecher teilt seine kritische Sichtweise auf die Gamma-Exposition. Er stellt fest, dass die meisten Handelsplattformen und -analysen, die er untersucht hat, keine aussagekräftigen Erkenntnisse liefern, wenn sie die Gamma-Exposition in absoluten Zahlen anstatt in relativen Werten darstellen. Er betont, dass die relative Stärke der Gamma-Exposition im Vergleich zum Durchschnittswert für den jeweiligen Aktienmarkt entscheidend ist, um die tatsächlichen Auswirkungen auf den Marktverlauf zu verstehen.
🧲 Magneteffekt großer Gamma-Levels
In diesem Absatz wird der sogenannte 'Magneteffekt' von großen negativen Gamma-Levels beschrieben. Der Sprecher erklärt, dass große negative Gamma-Levels dazu führen können, dass der Aktienkurs schnell zu diesen Level迁移动, aber dann Schwierigkeiten hat, sich von ihnen zu lösen, da der negative Gamma-Wert die Preisbewegungen verstärkt. Er betont, dass dies für liquide Indizes wie den S&P 500 (SNP) gilt, aber dass dies für individuelle Aktien anders sein kann.
🚫 Fehlende Wertigkeit von Gamma-Levels
Der Sprecher diskutiert, warum die Verwendung von Gamma-Levels ohne Kenntnis ihrer relativen Werte nicht sinnvoll ist. Er argumentiert, dass die meisten Handelsplattformen und -analysen, die er gesehen hat, zu irreführenden Schlussfolgerungen führen, wenn sie die Gamma-Exposition in absoluten Zahlen darstellen. Stattdessen sollte die relative Stärke der Gamma-Exposition im Vergleich zum Durchschnittswert für den jeweiligen Aktienmarkt berücksichtigt werden, um die tatsächlichen Auswirkungen auf den Marktverlauf zu verstehen.
🏁 Schlussfolgerungen und persönliche Überlegungen zum Gebrauch von Gamma-Levels
Der letzte Absatz fasst die wichtigsten Erkenntnisse des Videos zusammen und gibt einen Ausblick auf die persönlichen Überlegungen des Sprechers zum Gebrauch von Gamma-Levels. Er betont, dass die Verwendung von Gamma-Exposition für die Vorhersage von Marktbewegungen nur sinnvoll ist, wenn man die relativen Werte und die individuellen Profile der Gamma-Exposition für jeden Aktienmarkt berücksichtigt. Der Sprecher bedankt sich bei den Zuschauern für ihre Aufmerksamkeit und teilt seine Hoffnung, dass das Video hilfreich war.
Mindmap
Keywords
💡Gamma Exposure
💡Delta
💡Options-Kontrakt
💡Marktmakler
💡Delta-Hedging
💡Dynamisches Hedging
💡Illiquiditätszone
💡Momentum-Effekt
💡Mean-Reversion
💡Volatilität
💡Streikbasierte Gamma Exposure
Highlights
Der Sprecher ist aufgeregt über das Thema Gamma-Exposition und hat sowohl populäre als auch unpopuläre Meinungen darüber, wie man sie effektiv nutzen kann.
Gamma ist definiert als die Veränderung der Delta eines Options-Kontrakts, wenn der Aktienkurs sich bewegt.
Gamma-Exposition misst, wie viel Einfluss die Gamma eines Vertrags auf den Aktienkurs hat, indem man die Gamma mit dem offener Interesse multipliziert.
Der Sprecher erklärt, warum man bei Optionshandel meist über Gamma und nicht über Delta spricht, da Delta vollständig gehedgt wird.
Es wird auf die Bedeutung von Marktmaklern und ihre Positionierung bei Call- und Put-Kauf eingegangen.
Die Vorstellung von dynamischem Hedging wird erläutert, um die Auswirkungen von Gamma-Veränderungen zu managen.
Der Sprecher diskutiert die Unterschiede zwischen der Berechnung von Gamma-Exposition bei verschiedenen Plattformen und Methoden.
Es wird betont, dass die Gamma-Exposition für verschiedene Aktien unterschiedliche Muster zeigt und individuell analysiert werden muss.
Der Einfluss von Gamma-Exposition auf die Volatilität und Preise von Aktienindex-Optionen wie dem S&P 500 wird diskutiert.
Es wird erklärt, dass eine nahezu Null-Gamma-Exposition zu einer erhöhten Volatilität führen kann.
Der Sprecher teilt seine ungewöhnlichen Ansichten über die Auswirkungen von sehr negativer Gamma-Exposition auf den Markt.
Es wird auf die Bedeutung der relativen Werte von Gamma-Exposition verwiesen, anstatt nur absolute Werte zu betrachten.
Der Begriff 'Illiquiditätszonen' wird eingeführt, um Bereiche zu beschreiben, in denen die Gamma-Exposition gering ist und der Markt schneller reagieren kann.
Es wird eine Diskussion über die Anwendung von Gamma-Exposition-Niveaus für den Handel mit Aktien wie dem S&P 500 (SPY) geführt.
Der Sprecher stellt seine Meinung dar, dass bestimmte Marktbewegungen nicht durch Gamma-Exposition verursacht wurden, sondern möglicherweise durch andere Faktoren.
Es werden Methoden zur Automatisierung von Handelsstrategien basierend auf Gamma-Exposition-Niveaus vorgestellt.
Der Sprecher warnt vor der Fehlinterpretation von Gamma-Exposition-Chart, die ohne relativen Bezug angegeben sind.
Es wird ein Fazit gezogen, und der Sprecher betont die Komplexität des Marktes und die Notwendigkeit, individuelle Analysen durchzuführen.
Transcripts
hey everyone today we are going to talk
about gamma exposure i'm very excited
for this video because i have some
unpopular and some popular opinions on
how to actually use camera and game
exposure to actually make plays earn
some money and profits do all kinds of
uh stuff with critics with our tools and
just sort of in general as well so let's
dive into all of this stuff right away
this video is sort of both for beginners
and for experts because there are some
insights that
i would hope you have not heard anywhere
else they're coming from all the data
analysis that we have done and our our
game exposure charts are slightly
different as well uh but without further
ado uh
let's start so
we are going to talk about what gamma is
so gamma is the
change in the delta of an options
contact as the underlying stock price
moves so let's assume delta is 0.5 of an
options contract and gamma is 0.1 if the
stock price goes from 400 to 401 delta
is going to increase from 0.5 to 0.6
because gamma was 0.1 now when delta
increases gamma increases as well and
let's say now gamma becomes 0.15
now if the price increases from 401 to
402 delta is going to go from 0.6 to
0.75 so it's a very abstract definition
a really good way that i think about
gamma is gamma is a speed
or momentum effect so as price is
increasing gamma since gamma keeps
increasing and it also keeps increasing
the delta ah this can cause a very sort
of momentum effect which is what we saw
with things like uh with things like
gamestop amc last year
and so this this causes these gamma
squeezes because it's it's it's it
causes exponential move since it's it's
increasing and then it it's also
increasing the delta as well so that's
what gamma is what is gamma exposure so
gamma exposure you just take in gamma
and for a contract you multiply it with
the open interest for that contract
which would be all the contacts that are
held by
customers right now and that gives you
the gamma and then you just sum that
gives you the gamma exposure for each
con for one contract then you just sum
that up for all contacts and that gives
you
the gamma exposure for the entire stock
that is what you are seeing right here
so gamma means scam exposure and these
each bar is a normalized value of the
gamma over the last year
so now we know about gamma and gamma
exposure
but why are we talking about gamma x per
year the the very first streak that
everyone knows when they start trading
options is delta exposure or delta why
don't we talk about delta exposure this
is a very important concept that not
many beginners know
so
now we need to talk about a dealer
positioning and delta hatching so
anytime you buy a call contract and i'll
just start with the call contact because
it's easy to explain anytime let's
assume you you buy a call contact
someone has to provide you liquidity and
someone has to sell you that call
contract
and that seller or that liquidity
provider here is a market maker
so you are buying a call the market
maker is going to sell you a call
selling a call is a bearish position and
market makers never want to have a
direction in the market they are there
to provide you liquidity and that's all
they are going to profit off of the bid
ask spread that's all that's their main
job so they don't really want to take a
direction but they just had to take one
because you were buying a call and they
had to sell you a call now in order to
hedge that
they are going to look at the delta of
your call let's say it's 0.5
and they are going to multiply it with
100 because each option is again and
gives you the ability to sort of trade
100 contracts uh 100 shares not
contracts they're going to take in the
delta of your contract and they're going
to multiply it with 100 that's 50. so
whatever position now that they had to
take because you wanted to buy a call
they're going to go against that
position so if they're selling you a
call and that means they're bearish
they're going to buy 50 shares of that
particular stock that you are trading in
options for so let's say for snp you buy
a 400 dollar call
and they're going to sell you that 400
call and then they're going to they're
going to buy 50 shares of snp now they
are delta hedged because the delta of
that contact is fully hedged so now if
the price moves up one dollar let's say
uh
the
if the price moves up one dollar and
delta goes from 0.5 to 0.6
there though the shares that they bought
are also going to go up but the call
that they sold is going to go down in
value so the shares that they have
bought and the call that they have sold
are going to offset profits and that's
what delta hedging is but hopefully you
will be able to realize by now that
delta hedging alone is not enough
because we have gamma we just talked
about it it is the change in delta so
delta is always changing it's not static
hedging as gamma and delta changes they
have to change the underlying shares
that they just bought they have to
either buy more shares if delta keeps
increasing and then gamma keeps
increasing as well if delta decreases
then they have to short those or sell
those or cover those uh
or sell those shares not cover those
here they have to sell the shares that
they just bought
so then that's what dynamic hedging is
and so anytime you buy a contract
dealers are so sophisticated these days
that they are
right away delta hedging that contract
so the delta part of it gets removed
immediately
and that is why we never talk about
delta gamma is the part that keeps
changing
and gamma is the part that they really
need to care about apart from banner and
charm flows which we'll talk about in
some other video
but delta isn't something that they're
they're worried about they're worried
about gamma and gamma exposure is
where this sort of this whole thing of
trying to understand what gamma exposure
is
and then trying to use it to predict
market moves or actually just sort of
anticipate different kinds of scenarios
so i just wanted to discuss why we don't
talk about delta because when i started
i did not know why people were just
talking about gamma and not delta delta
is always
fully hedged it's a gamma that causes
those dealers to then start to
dynamically hedge and that's where we
can get some alpha from
so
now that we know about
why delta does not matter let's talk
about gamma exposure again
so we talked about how to calculate
gamma expo here you take in the gamma
multiplied with the open interest then
sum sum sum of everything
that's
not really good that's one way of
calculating gamma square but it's not
good
so now that we know uh now that we are
saying it's not good let's talk about
why so now we are going to talk about
long
and short gammaxx for you what we are
seeing here
is negative gamma which means short
gamma and this is a chart for dealer
positioning so these are positions for
dealers so we are seeing here that for
snp dealers have been short gamma over
the last one here
now what does short versus long gamma
means anytime you are buying a contract
you are long gamma and anytime you are
selling a contract you are shortcut so
if dealers are short gamma since they
are taking the opposite trades of us
that means that customers have been
buying both calls and puts or just calls
or just puts but they have been buying
contracts because then they have a
positive camera and then dealers have
negative camera
what if dealers had positive camera what
if dealers have negative gamma how does
that affect the stock price or
volatility or things like that
so when dealers have positive gamma
let's talk about that example first
because there are obviously some days
where dealers had positive gamma
exposure when dealers have positive
gamma or positive gamma exposure
then as the price goes up
since gamma is the change in delta
as the price goes up one dollar
since gamma is positive dealer gamma is
positive the deltas of the dealers are
going to increase by the amount that gx
is giving us
and so when the deltas increase
remember they want to state delta has
and this is where dynamic hedging kicks
in they want to short in order to stay
delta hedged so when price goes up they
are actually required to short if they
are positive camera when price goes down
their deltas decrease
because gamma is positive
their deltas decrease they have to buy
back
their short positions and that causes
the price to go up so positive gamma can
cause a pinning effect or can cause a
stabilizing force in the market because
whatever the price is doing dealers have
to do the opposite of that and that can
have pin a price
what happens if they are negative gamma
as we are seeing in this screenshot here
if they are negative gamma then as price
goes up since we have negative gamma
price going up one dollar is going to
cause the deltas to decrease not
increase now because we are in a
negative gamma so dealers deltas are
going to actually decrease so as price
goes up
dealer deltas decrease dealers deltas
decrease and they are going to have to
buy more in order to stay hedged
and when that happens they are actually
supporting the price if price goes up
dealers are also buying
because their deltas are further
uh
decreasing
and if price goes down their deltas are
increasing so they're going to short so
then price is going down they're
shorting as well so that can cause a
momentum effect so these are some fairly
uh non-concepts that you might have read
somewhere else and i just wanted to
discuss them before we go into slightly
more involved topics so now i believe
you know about what a gamma is what
gamma exposure is how do we calculate it
uh what what's delta what's the role of
delta what's the static hedging then
what's dynamic hedging
now we are going to talk about the pros
and cons of how some people how some
products or how some platforms calculate
gammaxx per year versus how we calculate
it
so most of the time what people do is
they take in the gamma of a contract and
multiply it with the open interest
and then they assume that all calls are
sold and all puts are bought which means
uh deal for dealers the calls are going
to give them positive again my inputs
are going to give them negative gamma
because customers are selling calls so
customers are short gamma dealers long
gamers and customers are buying put so
the customer is a long game on the put
side delays are short gamma on the put
side
that's a very very
fairly
basic assumption and i hope you
recognize that
there is definitely not a case where
all calls are sold sold all puts are
bought and the reason this sort of
theory arrived was because most
institutions uh they are long snp shares
so in order to hedge that they can do
two two things in order to hatch that or
an extra yield they can do two things in
order to hatch that they can buy puts in
order to earn some extra yield they can
sell calls so that's where this theory
of like people are always selling calls
or institutions are always selling calls
buying puts i came from it's valued to
some extent but it's not
true especially for individual stocks
and even for
indices as well
so what we do
is we have something called a dealer
open interest where we look at each
position and we look at whether that
position was actually bought or sold
so let's say there are 500 the open
interest for a contract is 500 and then
we actually go ahead look at all the
individual trades that amounted to a 500
open interest remember open interest is
just the number of open contracts it
could be contracts that were bought to
open for that which sold that were sold
to open
so
we go into individual trade and then we
look at whether
whether trades were bought positions or
sold positions then we sum them up and
the net sort of value that we get is the
true dealer open interest or customer
open interest and then based on that we
calculate our gamma exposures urban
exposures and things like that
so that's a slightly better way we
believe of uh calculating mx power there
are more sophisticated ways of actually
using implied volatility surfaces that's
something that we're working on right
now but we don't have in the platform i
believe the way we look at the bid ask
and sort of whether the trade was a
board position or a sold position that
still works pretty well it's much better
than the very simple assumption of all
calls being sold all puts being bought
and so that's what we have but i think i
have talked enough
about
these
sort of concepts and i haven't really
talked about how do you actually use
gamma gammaxx per year from
our platform and i would hope most
people are here for that
so now let's actually go to
the jacks or the game explorer so we are
going to talk about the total checks
first and then we are going to talk
about the strike based so this is the
total jax
for s and p
and then on the on the x axis we have
the
on the x axis we have normalized x which
is the value of checks divided by the
max value of checks over the last one
year so this just gives us a range of
one to minus one and then we have on the
y axis
the future price change of one day two
day three day whatever parameter you
have set here so right now we are
looking at
what was the value of jax
and what happened the next day
you can see here that if checks is
extremely negative then price is
actually being pinned
and this is where
i have such an unpopular opinion
most of the papers or the blogs or the
videos that you see are going to tell
you that gamma exposure when it is very
negative and it makes logical sense that
when it is very negative it should cause
some momentum effects
but when you go and look at the data for
ascent p we are just talking about spy
for spx
all the things that we talk about that
we talked about actually hold true very
negative gamma does give you more
volatility but
snp or spy is an index as well it's a
very liquid index
so many people trade options in snp
but i have never read a paper or a i've
watched a video or read a blog post that
actually talks about the fact that gamma
exposure for different stocks has very
different profiles very different
volatility and movement profiles so for
snp
anytime we have very negative gamma we
are not really getting momentum place
what we are getting is a very pinning a
very good pinning effect in the market
anytime we have very low gamma gamma
close to zero gamma exposure close to
zero that's where we are getting the big
moves again each dot is a percentage
change the next day so it's a future
price change what happened the next day
objects today was 0 or minus 0.5 or
minus 1.0 and you can see how this is
like fanning out as we go towards zero
gamma or a very very slightly positive
gamma and this is causing more
volatility
and
i spent a lot of time just making sure
that this graph was valid and i forgot
making a mistake and i am not because
when you actually look at spx if you can
just go to spx i won't do that because
that'll take a lot of time but you you
can just go to spxa and look at the game
exposure their gamma exposure does as
fear in when we are in negative games
for your territories we have more
volatility but for snp this is what we
mostly trade we don't trade spx for snp
the profile is slightly different
and that's where this whole concept of
you need to look at the data for a for
each stock
before you begin to internalize or learn
patterns for that stock
there is no the markets are so complex
these days that there is no single piece
of information that you can learn and
just
extrapolate it to every single stock out
there that just does not work
and that's the first that's the first
unpopular opinion each stock has an
individual gammaxx for your profile has
an individual correlation to how price
moves with different gammaxx for your
levels
and this tells us that as a gamma
exposure becomes gamma experience for s
and p becomes
close to zero we get more volatility
that's a very very powerful concept
because more volatility gives us greater
reward and greater risk so
in the days when you have more
volatility you want to be ready you want
to be making big plays like you want to
be on top of your game and you want to
also contain your risk but in days where
volatility is like very low or the
change in the price is going to be very
low which is what we are calling
volatility here
you can probably just stay out of the
market and just expect some job in the
market i hope you can realize that as if
you can predict that if you can predict
how much price is going to move tomorrow
that is a very very powerful thing for
both options traders and for any other
kind of trader as well
so this chart we also have a bar chart
distribution based on this chart so the
higher the bars the more volatility we
are expecting the next day if you want
to look at the how does uh price changes
in five days uh
very similar correlations where as we
move towards zero gamma price starts to
change quite a lot the volatility
increases
and then we have this price distribution
we have discussed that in length in our
dealer positioning video but
we have talked about now a total gamma
exposure and how does it relate to price
movements
okay
let's actually look at spx
we just added data for spx uh a couple
of weeks ago so
the the dashboard is somewhat missing
which is why
i did not want to sort of go into the
details here but still let's talk about
it so let's go to gamma so here you can
see that
as we move towards positive gamma we are
squeezed a lot and if you zoom this
chart out you can't do that here but i
did it on my laptop you can see that
these bars are much higher than these
parts so in reality
what we are seeing is
volatility increases a lot as we do move
towards the negative gammaxx per year
for dealers level which makes sense
which we talked about
but i just want to emphasize that since
markets are so complex and we have no
idea what's the relationship
between spx options and spy options and
how are people
sort of trading these inter relatedly so
there could be a more logical
explanation but you have the data just
look at it
and know that there are certain
differences in and different stocks
different pairs of stickers different
indices and different things like that
so for spx most of what you read online
is true but for other stocks even for
spy it is not true so let's go back to
spy now
okay so it's a really nice chart because
it helps us predict volatility that spx
chart was a bit cluttered as you just
saw so i often use spy to predict how
volatile the next is going to be
now that we
have an anticipation of volatility i
want to mention that when you are
looking at total gx
do not use it do not use the total gamma
exposure to predict the direction of the
move
that is where a lot of people make sort
of try to use this they try to use this
price distribution chart
you cannot use the price distribution
chart when the correlation between the
next day's move and the gx is like 0.012
that's like 0 so that's telling you that
there is no predictive power in the
direction in the directional prediction
for jacks but there is a lot of
predictive power for volatility
prediction which is why you are seeing
this nice fanning out pattern as we go
to right the graph starts to expand
that's total gx
and that gives you a very good estimate
of future volatility that's again very
useful now let's talk about
a gamma exposure by each strike because
that's what that's like the hot thing
these days and a lot of people talk
about it i've spent the last four weeks
just dealing with gammaxx for your
levels now let's go to them
this at the game exposure level then
then the white line is simply a sum of
each level in a cumulative way so i'm
going to hide it by clicking here
this is what you are seeing
the game exposure levels are what you
are seeing right now the white the white
bars are where we are at right now the
green bars are where gamma exposure is
positive red bars is where gamma
exposure is negative and we have talked
about what happens when gamma exposure
is negative and what happens when gamma
exposure is positive negative causes
momentum positive causes
mean reversion
now
the very first thing that we saw with
snp was
our sort of logical explanation on what
happens with positive and negative gamma
did not hold true for spy it held true
for
spx
but
just for the sake of discussion here
because i think like this is so
important to discuss on like different
stocks having different profiles let's
still stick with this chart obviously i
think you might be wanting me to go to
spx chart we can probably do another
video for that just sort of analyzing
the game exposure levels for that but
but i want to stick with spy because
i've spent so much time with this
and
okay we have the positive levels we have
the negative level and these are just
based on uh you find the open interest
in a way that we calculate open interest
then just multiply uh it with gamma for
each strike and just sum it up across
all contracts for that strike and this
chart is what we're getting but this
chart is looking very very different
from the charts that you might see on
other platforms or online or somewhere
else because
this chart is all squished down to these
small bars why is there so much empty
space here
now let me go through some
very unpopular but data-driven insights
so most people say that when we have
negative gamma as price moves towards it
it causes these momentum effects so if
if there is very large negative gamma
let's assume at 392 then as price let's
say starts to move down from 40 400 to
399 to 398 it might quickly move towards
the 392 because again it's negative
gamma so as price is moving towards it
that gamma and the deltas are going to
increase or decrease based on what the
color is uh i are going to actually sort
of it's going to cause a momentum effect
because it's negative gamma and dealers
are going to support whatever move is
happening
and we have discussed that
and
uh one thing that i wanted to discuss
was like this is how gamma looks so as
we go close to those bars as we go close
to at the money or in the money these
gammas are going to like have start
going to a peak so this is a bell shaped
curve
which means once we reach at that bar
gamma is maximum but once we reach once
we reach like a head or
behind it like any time we are ahead or
behind that bar gamma is gamma starts to
decrease so at that bar is where gamma
is going to be maximum but as we are
let's let's assume this is a very big
bar red bar it's going down as we are
reaching towards that bar you can see
how gamma keeps increasing increasing
increasing and if you're in a negative
gamma regime then that negative gamma
keeps increasing increasing increasing
and that can cause that can cause those
deltas to change immensely or massively
and that can cause these momentum
effects but once we reach that
particular strike that's where
now the gamma is maximum so there is no
more momentum effect
so when i started learning about gamma
exposure levels i always thought that
once we reach these negative gamma
strikes that's where the momentum is
going to start that's not true at all
once we are reaching towards these
negative gamma strikes
is where uh
we are going to have some momentum
effects once we reach this green because
there is positive gamma on those strikes
then we are going to start to like
price is going to start to do the
opposite mm's are going market makers
are going to start to do the opposite of
what price is doing so it can quickly
repel the price or cause some pinning
effect
that's that's the theory behind trying
to choose a gammaxx for your levels and
anytime you see red you are expecting
the price to have some momentum when
it's going towards those red levels
anytime you see a positive level then
you are expecting the price
to start to at least stop or go towards
the opposite direction as it starts
reaching those green bars
we have a really good approximate we
have a really good variation of this
which we call
spot jets where
any time so all the negative gamma
levels above the current stock price are
converted to positive gamma levels or or
the positives are converted to negative
so we flip the gamma levels above the
current price
so that if there is a gamma level that
if there is a negative gamma level above
the current price it becomes green and
it looks like it can cause a momentum
effect or it can cause a bullish move
so these all of these green levels were
actually red as you can see but these
red levels if we moved towards them were
going to cause a momentum effect so we
just turned them like we just flipped
them and now they they have become green
because they were above the current
price anything that's below the current
stock price so we'll still keep acting
as it is if there is a red level below
the current price then again it's a
negative level it can cause momentum
effects but if a red level is above the
current stock price it can cause a
bullish momentum effect and that's what
we color green instead of red on the
normal gx chart and the green ones are
going to cause some resistance so we
turn them we flip them as well and that
can cause some resistance now so it just
makes reading gamma exposure very easy
okay
we have talked about the basic concepts
of how to analyze these bars and like
that's all you need to know but
i was thinking like if
this is that easy then why not build
some automated strategies
anytime we have let's say a red bar and
we start going towards it let's
uh just like create a momentum play or
create sort of a moving average or trend
uh strategy and then anytime you reach a
green bar let's stop let's exit and that
should work well that does work well but
there were so many caveats that i
learned over the last four weeks and we
are going to discuss those today so
one
the very first lesson that i learned was
all the charts that you see that you saw
online on tradition and that you still
see online on many other platforms and
i'm not really honestly trying to knock
down any other platform
i'm just trying to
convey what i learned and how it was so
important anytime you see a game
exposure chart like the one that you're
seeing right now let's go to the normal
game explorer
these charts are meaningless
if they are not drawn in a relative term
let me explain why or let me explain
what does what do i mean so let's assume
this red bar
was a gamma exposure of minus 200
million in notional value
let's assume that meant any time price
went up one dollars market makers had to
invest 200 million dollars in buying snp
shares
okay uh that's useful like we know that
marketing 200 million dollars is a lot
of money so market makers will support
us price will have a momentum effect
but how do you know 200
million dollars is a lot of money you
don't you like if you are a retail
trader then honestly you you don't
really know that
because for spx
even if there is like
20 billion dollar gamma level it will
still not be able to move the price more
than like 0.5 or even like a one percent
and these are just some sort of
statistics that i've seen in the data
like there is no logical explanation but
the point of telling you this is like
even if these gamma levels are huge
it is very hard to cause big moves that
happens with individual stocks but let's
just say for the sake of
snp it is very hard for game stop and
individual stocks sure it happens
sometimes and gamma can cause squeezes
in both ways up and down so that's a
topic for another time but let's just
talk about s p so now you don't really
know what 200 million dollars for snp
and 500 million dollars and 100 million
dollars in game exposure which is again
gamma multiplied by 100 multiplied by
the open interest just sum it up that's
the gamma exposure we multiply it with
sort of stock price and then
zero point
multiplied by stock price that
calculation is done in order to like uh
predict how much gamma is going to how
how much dealers are going to
short or go long
in dollar value if price moves up let's
say one person
those are just some some details that
you can you just ignore what i said in
the last one minute if you did not
understand it but the point is like it
is useless if you're looking at a gamma
exposure chart
and it is not in relative terms it's
just in plain terms like with hey here
is minus 100 million
dollars gamma exposure here is 500
million dollars gamma exposure in
positive negative whatever
that is not useful and
again i'm not trying to knock down
anything else i'm just trying to tell
you that i've done so many experiments
and looking at these absolute camera
levels looking at these levels in
absolute terms of what their value is
is not meaningful
okay why is that because any time
let's say 100 million
let's say there is a level that's for
blitz that has a value of 100 million in
gamma x per year
let's say the average value of
a level for the same stock let's say for
snp over the last two months
has been 600 million dollars now
if you are not looking at those values
every single day
you would have no idea that the average
value of each bar here
was 600 million dollars
and you were just you would just look at
that 100 million and if at that day that
100 million was the highest level
then you would just think that hey this
is the big level price will mean revert
from here because this is the big green
level
that's absolutely useless because that
is 100
versus the 600 average 600 million
average levels that we typically get so
that level is so small for that
particular stock for snp here that it is
not going to cause anything like that
level is completely meaningless and i
cannot emphasize this enough
as
when the relative value of these levels
is small
these levels are completely meaningless
it's when the relative value the
relative value being the value of this
the total value of
the jacks of this level or of this bar
for this particular strike
is greater than the main average value
of let's say the total checks that we
get for s and p or for these bars
if it's greater than the mean if it's
like let's say
like 50 percent greater like two times
greater or even just greater than the
main that's where like those are the
bars that we need to take care about
and so all of these bars that we're
seeing here are sitting at like 0.1 to
minus 0.1 which is like the value of the
bar divided by the total
average checks for snp
this is very very small
and now here is where like i see a lot
of people doing like going to misleading
conclusions so
now that we know that these these like
the chart that we are seeing is not that
meaningless and it is not that
meaningful sorry
now if we go to snp we can see that we
went to four zero two four zero one and
then we had a big move from four through
one all the way to 390.
and many people will look at this chart
if this was like a full chart and we did
not cap it we did not sort of uh
reduced the size of these bars just
because their relative value was small
people would uh look at it and they
would say that hey 400 401 were green
level so we there was some main
reversion from there and then these were
all red levels so there was some
momentum effect
then
maybe we
had to maybe we expected some resistance
at 394
which we did not really get
maybe we expected some support at 394
which we did not really like fully get
and then
there was a red level and then maybe we
expected some support at 392
and then we expected
the price to quickly
reach 392
and then we expected a strong support
and 390. now that's what this chart is
telling you and if you look at the price
that's somewhat what happened that day
we went to 390 we found support there
but but like the unpopular opinion here
is
that was not caused by gammaxx spoiler
and i know i'll get some flack for it
and i know
many people will not agree with me but
i am a data scientist and i have to say
things that i see with data
this move was not caused by cam exposure
it might have been caused by some other
exposures such as van exposure charm
some other kind of
some other thing in the market
but it was not caused by gamma expo yet
because gamma
was very very small
throughout the entire day so gamma x per
year was not strong enough to cause any
momentum
or any mean reversion moves it does look
like that but
i was talking about this with many of
our users
if you want to replace gamma levels
without knowing any gamma exposure
values just draw a line just draw a
support line at every round number so
400 390 380 370 and then even to like
five
as well 400 395 390 385 and you'll find
that those levels work pretty well those
are not like because of camera levels
that's just because most
of the options contracts
are traded at these round values so
there is just like a lot of dealers
sitting on those positions and that can
cause as price moves then we have
bananas for your charm expo here so
there are a lot of complex forces in the
market
that can cause those price at those
levels to become levels of interest
it is not just because of camera and it
is not due to gamma exposure alone
in this case i believe it was not
because of gamma exposure at all
and that's the hot take from this video
and i hope uh you'll think about it and
you'll do some do you'll do your own
analysis and you'll come up with
different conclusions now
if this level was a huge level let's say
if this was a huge red level
it was going towards minus 0.5 that's a
significant value
anything greater than 0.5 just
empirically i've seen that it's a
significant value now if these bars were
very very big
then if we had a move similar to what we
had then we might have been able to say
that just that move was probably caused
by gamma expo
not not here but
now when if these red bars were huge
then what would happen what would we
expect is as price
starts to let's say come down
we would expect these red and this is
important so please listen carefully we
would expect these red big red levels
to act as magnets
they'll act as magnets until price
reaches towards them
and then they will not cause a momentum
effect once the price reaches towards
them this is something that i did not
get when i started looking at gamma i
always thought that price will cruise
through these levels it doesn't these
red levels negative gamma especially for
snp
can cause even for other stocks and
again you can do your own analysis here
but this is what i have observed and
learned these big negative gamma
exposure levels can cause the
cause the stock to come towards them and
that happens because this is how the
gamma distribution looks
it peaks at these
at the exact value of these strikes
because we are coming towards them so
gamma keeps increasing but once we are
at i once we are at them gamma is not
going to increase anymore
okay so now what happens is
price can quickly come to these levels
but it can sometimes have a hard time
going away from these levels because
let's assume this was a big red level so
price came towards it quickly now it
starts to let's say there are some other
red levels so it starts to go towards
them but anytime it even makes a small
move back
this red level has still a lot of
negative gamma so any move is going to
get exaggerated so if we start moving
back then this red gamma since it's very
negative it's going to pull price
towards it again
so instead of causing a momentum effect
once we reach it it is going to cause a
magnet effect so it is actually going to
try to pin the price
on a big red level
people think that these big green levels
are going to cause this that's not
necessarily true
when we reach these big let's now assume
again these levels were big they were
high they were not really small when we
reach a high green level
now anytime price even starts to divert
from them
that price is going to divert a little
bit more especially if there are red
levels around these green levels so in
my analysis what i have observed is that
when we are moving towards that
bars that can cause a momentum effect
but once we are at big red bars that can
cause a pinning effect when we are
moving
when we are not moving when we are at
these green bars they are going to repel
the price because market makers are not
now going against what the price is
doing so that can cause actually a
repelling effect where once we reach
this we are going to even like this day
you can see that we ended the day on the
red bar not on the green bar
let's assume this was a big gamma day
and this was all because of game
exposure you can still see that like if
you don't agree with what i said earlier
on on the relative value even if this is
the chart that you were looking at you
can still see that we closed on a big
negative gamma level not on a big
positive gamma level
and
that's
basically it for the video and it
probably went a little bit much longer
than
what i had anticipated but i had so many
thoughts because i have been like knee
deep
into all the analysis on how to actually
choose scam expo here most people use
game exposure for snp for spy not for
spx but
i would love for other people to now go
ahead use some of these findings and
actually see how they work with spx i
would hope they work very similar
especially the one where we are talking
about the strikes and the relative value
of these strikes and the bars
and things like that and things but
that's it for the video the last two
things that i'll discuss is that we do
have filters uh to filter for gammaxx
per year that's expiring within seven
days within 15 days within 30 days many
people want to use these filters i'll be
very honest i don't think there is a lot
of value in using a dsl expiration
filter because
gamma is already very concentrated in
near-term expirations so there is no use
of using a digital expiration filter
when the thing that you're looking at is
already concentrated in shorter term
expirations so most people like there
are so many i believe misconceptions
about how to actually use gamma levels
and we have discussed some of them
but some people still want to use these
filters and sure and there is some gamma
obviously in slightly longer term
contacts as well so you might want to
skip that for shorter moves sure you can
do you can do that
but yeah i i don't think there is much
value in there so we have talked about
gamma gamma exposure why don't we
talk about delta exposure how do people
calculate gammax for your total gammaxx
per year and when to use it and then
strike based cam exposure and how to use
it
and we have talked about different
variations spot checks and checks and
then we have talked about talked about
some filters and i will i would like to
quickly go through one example here so
this is
the gamma exposure uh these are the
gammaxx period levels for iwm and these
were
bigger than snp so that's why i'm
discussing them you can see
one thing that we have recently
introduced or sort of discovered is that
anytime we have these like
low
gamma exposure bars
that region is an illiquid region so we
are assuming that market makers are not
sitting strongly
during those regions where we have low
cam exposure and let's also assume low
other exposures such as van and charmix
per year
that is what we call an illiquid zone
and illiquid zones are we as customers
or traders really want it's not the
large gamma zones or the large vana
zones that we want sure we'll do some
analysis we'll do more analysis we'll
talk about them but right now
where we are standing i believe we want
this illiquid zones because market
makers are not doing anything in those
zones
and we can probably get much faster
moves since we are passing through those
zones or once we are in those zones
and this is just an example so this zone
this gray zone is what we call an
illiquid zone because there was not much
gamma in there you can see price quickly
moved here and then this was obviously a
resistance level we had some resistance
we very made we very quickly made a down
move as well
so this was now since this has this had
slightly bigger gamma levels
you can see price quickly moved towards
this level and then
obviously we would expect some kind of
once price was starting to move up we
would expect some kind of resistance if
price moved
we would expect some kind of sort of a
pullback as the price moved just a
little bit down which we did not get
here
then the price uh
went down and you can see like both this
level and this level
this level was actually i believe the
highest level both of these levels
quickly pulled the price towards them
but then anytime price did anything else
and it just came back a little bit this
level would uh quickly pull it towards
uh towards itself as well and that
happened like here here here here so you
can see like price quickly reaches these
levels but
once it starts going
below above these levels then these
levels at least try to pull the price
towards them and then anytime we are in
these illiquid zones
that's where the price can
slightly move freely so let's actually
look at spire because i do think we had
an illiquid zone here
so i'll just draw the gamma exposure
levels
okay so this is the zone that we i am
talking about so we had some let's say
gamma at 392
then at 396 398 and 400
sure let's just skip those gamma levels
because they were very low i believe now
i'm just wrapping up the entire video i
believe
some of this move was probably caused by
some factors sure include game exposure
as well if you want to but i think the
move from
about 400 all the way to about 392
was actually caused because of ill
liquid regions not because of cam
exposure
because there was let's say there were
no dealers sitting on big positions here
so they no hedging was required price
could do whatever it wants to do without
dealers being involved and that's always
a good thing we don't want them to be
involved all the time because they are
doing all kinds of hedging and there are
not just camera catching there is like
banner hedging and charm hedging so that
can cause like weird effects and since
that's such a complex topic
it it's much easier for us when they are
not there at all and that's where these
ill liquid regions come in i do believe
like from here onwards to here
till till this level we had a very
illiquid region and that caused the
price to quickly go down i don't think
it was the negative gamma strikes or it
was the negative gamma that we had i
think it was the illiquid zone
and with that i'll stop this video
because it has already gone very very
long and thank you so much if you have
made it this far like that that was so
much information and sometimes i i
believe i went on a rant because like i
had so many things on my mind and i hope
this was still useful for you and this
gave you some perspective on
how to actually use gamma levels if you
do want to use them but then how to
actually navigate through the pros and
cons of gamma and gamma exposure and
gamma levels and again i just hope this
is useful for everyone i hope you have
some idea on how to actually use our
gamer levels and yeah just you i hope
you learned a couple of things from this
video thank you so much for watching
this i will see you guys around
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