How to Trade 0DTE SPX Using Gamma Exposure GEX

What's going on, guys? Over the past few years, you've all heard about the recession approaching, that indicators of the apocalypse are at extreme levels, and that the stock market is about to collapse. But the market continues to grow. This is because over the past 10 years, and especially after the pandemic, the factors that influence price movements have completely changed. The market is now driven by liquidity and the actions of market makers. And the actions of market makers now need to be monitored first. Here are a couple of examples of how to determine the direction for day trading. This is the gamma exposure profile for SPX on May 20th. Let's think about what primary conclusions we could draw for ourselves about the upcoming day just by looking at this chart. The day opened at 5,940 points. And the first thing that catches your eye is that the gamma flip zone is located at 5955. Gamma flip is the place where gamma exposure goes from negative values to positive ones. And I have already said many times that it will always be either strong support or strong resistance. Since this zone is now above the price, it is perceived as a strong intraday resistance. Plus, there are also large absolute gamma values here. This is the purple zone. What other levels can we identify for ourselves? Of course, the 5900 level is striking. The largest negative gamma values are here. This is the largest red column. And these are the largest absolute gamma values. Well, just in case we can mark the 6,000 point level as resistance, there are also large absolute gamma values here. And these are the largest positive gamma values. That is, if the price suddenly overcomes the 5,955 mark during the day, then this level can be identified as the next growth target and at the same time as the last resistance level, which should keep it from further upward movement. But this is an unlikely scenario because as I said above, 5,955 is the strongest resistance level and 6,000 is far from it. That is, if on that day the largest positive gamma values were not at 6,000, but say at 5,970, then one could assume that with a breakdown of 5,955, the price would still touch it and after that a reversal would take place right there. 6,000 was really far away, so there wasn't much hope for it that day. It turns out that if we talk specifically about May 20, then we could have drawn up such an action plan. The 5950-5960 level will not be broken up from there. A downward movement towards 5,900 will begin to unfold and this level will act as support as a result. If we look at that day, it turned out that the price did not go above 5950. It went down towards 5900 and from there there was a rebound. Lets take a look at a couple more examples of how to understand how a market maker will move the price on June 5th. The day began with two falling candlesticks in a 15 minute interval. If we look at the gamma exposure profile, we could identify three key levels as the closest reference points. 5950 is the nearest support zone. There are the largest negative gamma values and there were the largest absolute gamma values a little higher. At 5970 the gamma flip zone was located which was a resistance. And at 6,000 points there were maximum positive gamma values as well as a large absolute gamma value. Maximum call options volumes were located there and this level also acted as a resistance. If you put all these levels on a chart they looked like this. I commented on this situation as follows. The price has reached the first support level, but despite the fact that it is primarily support, I would not take long positions here because the support level is weak. That is, if for example, the price was surrounded on all sides by positive gamma exposure and we would see some large blue column below the price, then it could be perceived as a safe support from which it is advisable to open along. Or if there was a gamma flip zone below the current price, this would also be perceived as support immediately despite the fact that 5950 is also supported. Given that there are two strong resistance levels at 5975 and 6000 growth may be limited. The main idea was that it is better to skip the upward movement and perceive resistance levels as resistance levels. As a result, the price reached the level of 6,000 points. And when it happened it was written that at this point I took the bear call spread. After this post was published literally 40 minutes later, this position brought about 80% of the profit. But look at how beautifully the price moved after that. From the 6000 level the price dropped back to the support zone, then bounced back to the gamma flip level. Then it turned back towards support. From there, another rebound towards the gamma flip. But the day eventually closed with a fall. If this is the first time you've heard what's being discussed here and you'd like to understand in more detail how it all works, I recommend watching at least these videos in the how to Use Gamma Exposure playlist. There you will find the answer to Most of your questions thanks to the gamma exposure profile, we can clearly identify intraday support and resistance levels and predict how the price will behave during the trading session. Also, depending on whether the price is in the territory of positive or negative gamma exposure values, we can understand the general market sentiment. Moreover, we cannot limit ourselves to just one day. We can make forecasts for a couple of weeks ahead. But I understand that some comrades, especially beginners, would like to see more confirmation signals because sometimes a question may arise. Which of the levels is the magnet that the price will aim for? Which of the levels will be a strong resistance or support that will not be breached? In general, I would like some additional support for ease of orientation and friends. To begin with, I'll say this. If you just observe how the price moves relative to these levels for at least a couple of weeks on your own, you will understand perfectly well how to understand the strength of the level, how the price will move and what market sentiment prevails. But anyway, there is also a graph on the website on which all the key values of gamma exposure are plotted in the form of lines. This is the largest value of positive gamma, negative gamma the largest options volume and absolute gamma. In other words, only really significant indicators are displayed. But the most important thing here is the quant power line. Its meaning lies in the fact that during the day it acts as a compass that indicates the direction in which the price is very likely to move. Unlike moving averages or any other indicators, its key advantage is that it's completely independent of price. For example, if we take any moving average, whether the 20 or 50 ma, they are all just lagging derivatives of price action, not drivers of it. When the price rises, these moving averages will follow, but they don't determine the price direction. Rather, the price dictates their movement based on its own behavior. The quant power line, unlike them, does not react to where the price is now. On the contrary, it indicates the direction in which the price is very likely to move. Here are some examples of how it works. Friday 6th June started the day with growth and in the first 15 minutes the market rushed up. At the same time, the quant power line was at around 6,000 points. An hour after the start of the trading session, the price approached. It tested it as support and there was another upward rebound. However, an hour later the price moved to a sharp drop, but the line still remained at 6,000. After that there was an upward rebound to retest this level as resistance and another deeper downward move. But the quant power line still stands at around 6,000. That is, it indicates that the fall will be redeemed and indeed the market is starting to grow and go higher. But even here the lines do not change their position. As a result, the day closed on this line. Do you see? Despite the fact that there were a number of contradictory movements within the day, the line remained calm and served as a guideline for the price to aim at all the way, regardless of whether it is above or below it. Another example, on June 3, the market opened at 5,940 and the price was here. The market was located on the territory of positive gamma exposure, meaning the price was surrounded by blue bars. From below, there was a strong level of 5,925 to 5,910 as support. Here was the gamma flip. 5,910 and 5,915 are the two largest negative gamma values. And plus, if we superimpose the absolute gamma value, then the largest AG values were here on that day. On 3 June, taking into account the fact that the price was in the territory of positive gamma exposure, the level of 5,960 could be identified as the first growth target. There was a support zone from below. And if we look at this chart, we can see that even at the very beginning of the day when the market just opened, the quant power line was at 5960. This was a specific guideline that the price would rise. As a result, the price actually reached 5960 broke through. This level continued to grow and two and a half hours before the end of the trading session, it was between two important levels. From below 5,960, which was now perceived as support, and above the 6,000 level. And then the question might arise that the price is between two equivalent levels where the next movement will be. It seems that there are still two and a half hours before the market closes and it is unclear whether it will have time to test 6000 as resistance or still go back towards 5960. But if we look at the quant power line, then despite the fact that the price was higher at that moment, the quant power line did not change its position. That is, if at the beginning of the day when the price was lower, it acted as a target for growth to 5,960, now it acts as a target for decline. As a result, the rollback took place precisely to this level. But the quant power line has one feature. It can change its position during the day. For example, if at the beginning of the trading session the price was at 5940, the quant power line is at 5960 and the price reaches 5960. If the algorithm calculates that the price will rise further, for example, to the level of 6,000 and will trade around this range most of the time, then it can adjust to this level. If there is a high probability that despite the rise or fall, the price will still return, then the line will not be rebuilt. An illustrative example is spy. On May 20th, the price revolved around the 593 level all day. Towards the end of the day, a very powerful downward deviation took place, but the line did not change its position and as a result, the day closed near it. Well, the less time left before the market closes, the more likely it is that the day will close around this line. Friends, I think you are sane people and you understand that when it comes to an index that costs 6400, an error of 5 to 10 points will be fine. The price may close slightly lower, it may close slightly higher. It will still be considered that the level has worked itself out. In particular, on the day when the 5960 level worked out again, and there was about half an hour left before the market closed, the line was rearranged at 5970 and the day closed there. But here is an example of 29 May. The price revolved around the 5900 level all day. At the end of the session, the line did not change its position, but in the last five minutes, the market rebounded and closed at 5910. In general, the line also fully worked itself out because apart from the last five minutes, the price has been trading around it all day. And even at the end of the session, the deviation was minimal. The main idea that I'm trying to convey to you is using the gamma exposure profile, we build the main intraday support and resistance levels depending on whether the price is in positive or negative gamma exposure. We have a very clear idea of whether the bulls will control the day or whether negative sentiment prevails in the market. I mean, if the day is trading in positive gamma exposure, the quant power line is above the price and the support level is below the price, then you can expect continued growth on that day. And if the price approaches the support level, this will be the best point to open long positions. You can find out more about this in the corresponding playlist. And here let's get to the most important thing and I'll tell you about the unique power Zone button. When you click on it, you will see a yellow zone like this. Its main advantage is that it shows the two most important things. The first is the range, the second is the goal. What is the meaning of the range? To put it as simply as possible, if we visually select for ourselves a square inside which the largest values will be concentrated, then this will be the range within which the day will be traded. Here we see that the most interesting thing ends at about 5,985 to 5,990, after which the decline begins. And as for the levels below, the most interesting ends at 5,930, after which there is also a decline. Accordingly, the price will trade within this range one more time. If we look at the gamma exposure profile, if we look at the absolute gamma values, then we highlight all the key levels for ourselves. And it's just that beginners often wonder which of these levels is most important, which resistance will act, and so on. So, thanks to the power zone, the range is sharply narrowed. And within the framework of this example, this means that despite the fact that 6,000 points is a very significant zone, there is no point in increasing the price there. What is the main usefulness of these zones? Firstly, if you trade options, then you can use them to build some neutral strategies. Understanding the level above which the price will not rise and below which it will not fall. You can build, for example, an iron condor. Of course, it can also be based on the key values of gamma exposure. But due to the large range and the fact that volatility was constantly decreasing on that day, this strategy would not be very justified in terms of the risk to profit ratio. But just due to the fact that the power zone narrows the range, you can increase the potential profit. The second advantage of this zone is that it answers the question of which of the levels is the most significant and which will act as support or resistance. Here we see that even if the price rises to the level of 6,000 points, that is at some point there will be an upward movement. We understand that based on this picture, there will be no point in the price staying here, and the level of 6,000 will act as resistance, after which the price will begin to return to this zone. Again, the same applies to the nearest support level. If the price falls there, as all the most interesting things will be higher, the price is very likely to bounce off the support level and move towards the maximum values of the power zone. And as for the second function of the power zone, namely its maximum values, we perceive them as a guideline. Towards which the price will move. This zone is updated every minute, and every time you refresh the page, the value will change. And the more a certain level stands out, the more it will attract the price. At the beginning of the day, the power zone will look more vague. On that day, literally 10 minutes after the market opened, the picture looked like this. The price was at 5,933. There was a support level, there was a resistance level, which simultaneously served as a growth target due to the fact that there were larger values of the power zone. Therefore, at the beginning, it was possible to count on an upward movement. And this screenshot was taken literally half an hour later. The price was still at about the same levels, but 5960 was already starting to stand out much more strongly. An hour and a half after the market opens, the power zone begins to take on even clearer outlines. And another advantage of this indicator is that as I said above, the quant power line can change during the day. If there are prerequisites for this. But I'm focusing on just one line, we would have seen this realignment already. In fact, thanks to the power zone, the probability of future movement of the quant power line becomes much more predictable. In other words, the maximum values of the power zone will coincide with the current quant power line. But since the power zone is updated every minute, if when updating the page, we see that the power zone is starting to grow very actively on some strike, and logically we understand that a little more and the current maximum values will be updated, we will already understand where the quant power line will be rebuilt in the future and where the price will tend. In other words, you have a powerful arsenal in your hands to understand what is happening in the market. According to the gamma exposure profile, we can see all the main levels. Thanks to the power zone, we understand the power of these levels. For example, if the power zone matches the maximum values of absolute gamma or positive gamma, then these levels will be considered a magnet that will attract and not let go of the price. But if there are maximum absolute gamma or positive gamma values above the price, but the power zone is below the price, then we understand that if the price rises to the maximum absolute gamma values, this level will act as resistance and turn the price down. Well, I think you've already understood from the context that as the trading session progresses, the power zone will form the place where the day will close. And this is also a cool thing because there are strategies like Butterfly or Iron Butterfly which have a huge risk to profit ratio. So a couple of hours before the market closes, you can open these strategies by setting the center at the maximum values of the power zone, while setting the width of the wings to the minimum value of literally 10 to 15 points. There are also charts on the website that show dynamic support and resistance levels. There is an extended range page that shows absolutely all the important levels, and there is a description of the market background where, in addition to the general market sentiment, the importance of levels and the likelihood of a reversal or breakdown are described.