Welcome to the Trading Volatility Tips & Education Hub

What is Gamma?

Gamma measures how much an option’s delta changes as the underlying price changes. It peaks when the stock price is near the option's strike price. You can jump right into the deep end by reading about Gamma Hedging. on Investopedia.

Why Should I Care?

Large gamma at a strike price acts like gravity. Market Makers hedge around these levels, which can cause stock prices to accelerate or stall.

How Market Makers Hedge (And Why It Moves Prices)

Market Makers aim to stay delta-neutral. Gamma positioning determines what action Market Makers take as the price of a stock moves. Their reactions depend on the gamma regime:

• Positive Gamma: Hedge against moves → dampens volatility.
• Negative Gamma: Hedge with moves → increases volatility.

Key Concepts

• Call Resistance: Heavy positive gamma from calls can limit upward price moves.
• Put Support: Heavy negative gamma from puts can provide a bounce or floor.
• Pinned Price: When both call and put gamma are high near the trading price.
• Gamma Squeeze: Fast moves from Market Makers forced to re-hedge large negative gamma positions.
• A "Gamma Call Ladder" is formed for speculative stocks when there is relatively little put gamma across strikes, and there is a series of significant call gamma clustered across multiple strikes above the current share trading price. This results in high volatility conditions that can push the stock quickly higher.
• The gamma structure of daily SPX index options provide insight into intraday movements in SPX. See our Gamma Structure Cheat Sheet for SPX.

Getting Started

New to Options or Gamma?

Trading Volatility was built for self-directed traders at all levels. Whether you’re just beginning your options journey or you're an experienced trader exploring new tools, we’ve structured the platform so you can learn and scale up at your own pace.

Step 1: Start with Ratings and Dashboards

We recommend beginning with the ratings page and My Dashboard, which offer a simplified view of current opportunities based on our AI-powered analysis.

• Ratings are updated twice daily (open and close) and show a stock’s directional bias.
• My Dashboard helps you track a custom watchlist of stocks and key metrics. Here is a Guide on how to use it.
• You can easily sort and filter based on Bullish, Hold, Avoid, and other signal types.

Step 2: Enable Daily Email Alerts

To stay informed without checking constantly, enable daily email notifications for "My Dashboard Summary" in your Alerts / Preferences settings.

• You'll receive an evening summary with all updates to your selected stocks.
• Great for catching rating shifts without being glued to your screen.

Step 3: Build Familiarity with Gamma Concepts

Much of our advanced content relies on an understanding of options greeks, particularly Gamma, Delta, Theta, IV, and Skew. If you're unfamiliar with these, we recommend brushing up through the following:

• Our "New to Gamma?" section above
• Books or courses focused on options trading basics
• Following our blog and Substack newsletter for practical insights

Optional Tools Once You’re Comfortable

Once you're familiar with the basics, explore additional tools like:

• GEX Dashboards — to view gamma metrics for a universe of stocks
• Skew & IV Charts — to understand market sentiment and expected moves
• GEX Charts — to analyze historical gamma trends and patterns
• Dark Pool Charts — to gauge institutional sentiment and activity
• Put/Call Dashboard — to assess market sentiment and positioning
• Idea Dashboard — to discover new trading ideas based on our analysis

The platform is designed to grow with you — start simple, learn the signals, and layer in complexity as you gain confidence.

Using Ratings, Dashboards & Alerts

What Are Ratings?

Gamma analysis requires a deep understanding of options modeling and greeks. Our Ratings are automatically generated based on the current state of the stock's gamma structure, IV, and Skew.

Ratings can be used by customers as an initial tool to screen, sort, and analyze opportunities.

Ratings for nearly 1,000 stocks are updated once in the first 40 minutes of trading and again in the last 40 minutes of trading.

Our automated ratings system classifies stocks based on gamma structure, IV, and skew:

• 5 – Bullish
• 4 – Hold
• 3 – Avoid
• 2 – Wait
• 1 – Bearish

Trading Volatility does not provide any personalized financial advice. Ratings are not intended to be investment advice to buy or sell any security.

What is Vanna?

Vanna measures how much an option’s delta changes as implied volatility (IV) changes. It’s a second-order Greek that peaks for options near the at-the-money (ATM) strike and is particularly significant for out-of-the-money (OTM) options.

Why Should I Care?

Large vanna at a strike price can drive significant hedging flows when volatility shifts. Market makers adjust their delta hedges in response to IV changes, which can stabilize or amplify price movements in the underlying asset.

How Market Makers Hedge (And Why It Moves Prices)

Market makers aim to stay delta-neutral. Vanna positioning determines what action market makers take as implied volatility changes. Their reactions depend on the vanna regime:

• Positive Vanna: As IV rises, MM deltas increase, so market makers sell the underlying to stay delta-neutral → can dampen upward moves or exacerbate downward moves
• Negative Vanna: As IV rises, MM deltas decrease, so market makers buy the underlying to re-hedge.

Key Concepts

• Volatility Stabilization: Heavy negative vanna can lead to buying flows during IV spikes, providing support in a declining market.

MM VEX Positioning Summary

• MM deltas are positive. Short stock to stay neutral.

• Deltas are positive. Short stock to stay neutral.

What is Charm?

Charm, also known as delta decay, measures how much an option’s delta changes as time passes. It’s a second-order Greek that becomes critical near expiration, especially for options near the at-the-money (ATM) strike

Why Should I Care?

Charm creates predictable, scheduled flows, especially noticeable into Friday option expirations or during large open interest weeks. It helps explain why markets drift in certain directions without news.

How Market Makers Hedge (And Why It Moves Prices)

Market makers hedge delta exposure, and as delta decays, they must adjust their stock positions daily.

Negative net charm means MM deltas decrease. This means the must re-hedge by buy shares to remain delta-neutral.

Key Concepts

• Charm builds pressure quietly. It's not event-driven — it's clock-driven.

MM CEX Positioning Summary

• MM deltas are positive. Short stock to stay neutral.

• Deltas are positive. Short stock to stay neutral.

Practical Strategies Using Our Gamma Data

1. Spotting a Gamma Squeeze

• Look for a Gamma Call Ladder.
• GEX / Avg Volume less than -0.4.
• High short interest (>30%) amplifies potential moves.

2. GEX Flip

• GEX Dashboard Filter: GEX = Negative, Call Skew = Positive, IV = High (75+)
• Sort by GEX Change
• Click through to stock's GEX Charts page to confirm negative correlation between GEX and RISING price to avoid false signals. If history shows price falls during negative GEX, or prices rises with positive GEX, you can't use this strategy on this ticker.

3. Breakout from Consolidation

• Skew Dashboard Filter: Call Skew = Positive, IV > 126, BB Width > 10
• Sort results by IV column
• Good for straddles or directional plays
• Note: Stocks under $5 generally have widely spaced option strikes relative to trade price (in percentage terms), which makes them prone to a larger margin of error in the GEX and GEX calculations. These stocks are generally best avoided.

4. Directional Bias (Bullish)

Combine high call skew, negative GEX, and price confirmation → Call spread.

5. Low IV + Big Move Expected

Use a straddle when historical IV is low but GEX is strongly negative.

6. High IV + Range-Bound

Condor, butterfly, or short strangle work best with high IV and positive GEX.




***Other essential principles of trading options***

• Have a defined process on your option trades. What are the conditions to open the position? What is the structure of the trade? What are the conditions to close the position?
  
  
• Always be aware of event risks for a stock such as earnings reports. Earnings report days often have a large amount of implied volatility that is priced in, and that IV falls significantly after the event.
  
  
• Plan and identify price levels where you want to buy options. For example, don't decide to buy some calls on a day when the stock is up a bunch and chase price higher.
  
  
• IV, Delta, and Theta are important to understand when buying options, but they are critical when buying OTM options. You can still lose money on options even if you make the right call on the underlying directional move.
  
  
• Theta hurts an option's value the most in the week of expiration. Options with more than 60 DTE have smaller theta. Once there is less than 20 DTE theta really starts to increase. Deep in the money options have the least theta since those options are mostly intrinsic value there isn't much theta to decay (Theta is the decay of extrinsic value).
  
  
• Generally you don't want to hold options until expiration. Instead, sell after hitting your price objective or reaching your max loss. Sell/roll at least a few days prior to expiration if needed.
  
  
• The fewer the days to expiration the less room for error you have.
  
  
• Zero Days-to-Expiration (0DTE) options are high risk and have severe price fluctuations. Intraday price fluctuations make stops almost impossible to use and it's better to size-down your position instead of using a stop. For example, rather than use a stop at 50% just reduce your trade size by half with the assumption that it expires worthless.
  
  



Gamma Exposure (GEX) Calculation Info and Terms

• GEX is now provided in terms of $ per 1% move, with resepect to Market Maker's exposure.
• Previously we provided a "Naive GEX" and "Skew Adjusted GEX" (SA-GEX). As of May 15, 2025 we have updated our GEX models so that only one model is required.
• Our model utilizes several skew measurements to adjust the estimated MM exposure.
• Positive Skew Adjusted GEX: Daily movement subdued as Market Makers re-hedge by buying as stock price falls, and adding to their short as stock price rises.
• Negative Skew Adjusted GEX: Daily movement accentuated as Market Makers re-hedge by buying as stock price rises, and adding to their short as stock price falls.
•         (For additional details, see notes below and this blog post.)

GEX Data Table Details:

• Our data looks at all options with less than 94 days to expiration.
• GEX is expressed as "GEX($) per 1% move" the equivalent dollar value of GEX for a 1% move in the underlying stock. This is how much of a stock MMs must buy/sell per 1% move in order to remain neutral in their positions.
• "GEX/Volume" is the ratio for GEX (in shares) to the daily average trade volume (in shares).
• The "Flip Point" is the level where gamma changes from positive to negative, or vice versa.

Other GEX Notes:

• "Naive GEX" calculations assume that investors are primarily selling calls and buying puts (Market Markers buy the calls and sell the puts, then hedge their positive delta by shorting shares). We no longer track this because it is of limited use.
• Stocks under $5 generally have widely spaced option strikes relative to trade price (in percentage terms), which makes them prone to a larger margin of error in the GEX calculations. These stocks are generally best avoided.

Data Download notes: There is a "Rating" column in the csv sheets when you download historical data. Below is the code:
1 = "Bearish" - A Downward trend is in effect.
2 = "Wait" - Transitional setups, usually occurs when a stock is attempting a bottom
3 = "Avoid" - Lacks strong direciton.
4 = "Hold" - While in an upward trend, a consolidation period of lower prices is likely.
5 = "Bullish" - A Upwnward trend is in effect.



Skew Calculations and Terms Glossary:

• Based on the price of options, each stock has an Implied Volatility (IV). The Implied Volatility defines the one standard deviation move over a given period of time.
• "Expected Move" is defined as a One Standard Deviation Move, derived from the stock's current Implied Volatility.
• We measure skew three different ways.
1. Skew Ratio: Put IV @ 25 Delta / Call IV @ 25 Delta
2. Delta Skew: Call Deltas minus Put Delta for options that are one standard deviation out-of-the-money with ~ 30 days to expiration.
3. IV Skew: Put IV minus Call IV for options that are one standard deviation out-of-the-money with ~ 30 days to expiration.
Interpretation of Data:

• A stock with a positive Delta Skew has option demand skewed toward calls.
  
• A stock with a negative Delta Skew has option demand skewed toward puts.
  
• Sentiment can be evaluated by comparing the Current Skew to the Average Skew using the historical skew charts.
  

Implied Volatility Changes:
- Large changes in IV that are not accompanied by large price changes in the underlying are often a prelude to underlying price movements.

Skew Data Table Details:
- Our data looks at all options with less than 94 days to expiration.
- "1 Standard Deviation" is calculated using an average of IVs around the At-The-Money strikes, and then converted to dollars of share price for the given period.