Gamma Levels

The Gamma Levels plot type visually displays the the total dollar of amount of risk market participants have based on the changing price relationship between an option’s Delta and the underlying security that dealers (market-makers) may hedge to avoid taking on directional market risks.

Enter in a US or Canadian equity ticker or index symbol in the search for symbol box or used the symbol browser tree to search for your desired instrument. Note, Gamma Levels data is only available for US and Canadian stocks and indexes that have listed options. Once the underlying is selected you will see the ticker display in the right side of the dialogue. To remove the symbol, simply click the 'x' to the right of the ticker.

(Tip: When using the symbol tree, the Stocks → By Exchange, Index, Sector etc. branches have ‘Options’ leaves that only display underlying securities that have listed options)

Once the instrument is selected and moved to the top right side of the dialogue, click on the Gamma Exposure plot type to update the inputs.

By default, all expirations are selected. To customize the chart (view one or only a selected amount of expirations), click in the the ‘Expirations’ drop down menu and update the expirys.

For Plot Type, you can choose between ‘Call and Put Gamma’ to display the levels separately per strike or the combined net gamma per strike (Total Gamma).

For Gamma Exposure type, select either ‘Flat By Strike’ for the most recent gamma levels based on the previous settlement or use ‘By Percent Change’ to display the levels based on a 1% change in the underlying from the previous settlement.

Once all parameters are set, click insert and the Gamma Exposure plot will display in the Excel sheet. The Y axis displays the amount of Gamma Exposure (in millions ) and the X axis displays the strike prices. The green dashed line will display the most recent settlement.

Volatility Forecasting

Using the assumption that most buy-side or retail investors are long underlying shares, this leads to the approximation that dealers and market makers are therefore long calls and short puts. A usually common strategy utilized when owning shares is to sell calls to lock in profits (and limit losses in the event of a downturn) or buy puts as an insurance mechanism. Knowing where the assumed larger positions sizes of dealers who will generally strive to maintain a ‘delta neutral’ position can provide insights into the underlying price levels of where buying and selling pressures exist. These ebbs and flows can be considerably more apparent in short dated or 0 DTE options as dealers look to pin the ATM strikes.