Gamma exposure: why some strikes pin the index

6 min read•Updated on 12 Nov 2026•by GeniAnalysis

How net gamma by strike is estimated from open interest, how positive and negative readings are interpreted, and the assumptions the measure rests on.

Every option that is sold has a buyer, and many of the people on one side of those trades do not want a directional view at all. They hedge the option's delta with futures, and keep adjusting it as the market moves.

That adjusting is mechanical. It follows from gamma, and gamma can be estimated strike by strike from the option chain. Add it up across the chain and you get gamma exposure: a rough picture of how much hedging the open positions could call for if the index moved.

It is a model built on an assumption that public data cannot confirm. Read that way, it describes where the positioning sits.

Gamma, briefly

Delta is how much an option's price moves for a one-point move in the underlying. Gamma is how fast delta itself changes as the underlying moves. The Greeks article covers both in more detail.

Two properties matter here. Gamma is highest for at-the-money options, and it rises sharply as expiry approaches.

Gamma is the same sign for calls and puts. A bought option, call or put, has positive gamma. A sold option has negative gamma.

Why hedging depends on gamma

Take someone who has sold calls and hedged the delta by buying futures, so that the position is flat to small moves.

If the index rises, the sold calls move closer to the money and their delta grows. The position is now short the index again, and to get back to flat the hedger has to buy more futures. If the index falls, the opposite happens and they sell. A short-gamma hedger re-hedges in the direction of the move.

Someone who is long options and hedged works the other way round. As the index rises, their delta grows in their favour, and they sell futures to get back to flat. As it falls, they buy. A long-gamma hedger re-hedges against the move.

The size of each adjustment is set by gamma and by how many contracts are open. Gamma exposure estimates that size.

How gamma exposure is estimated

For a single strike, the usual approximation is:

Gamma exposure ≈ gamma × open interest × lot size × spot² × 1%

Each part has a job:

• Gamma × (1% of spot) is how much the delta of one unit changes for a 1% move in the index.
• × spot turns that change in delta into rupees.
• × open interest × lot size scales it from one unit to every unit open at that strike. Exchanges report open interest in contracts, so it has to be multiplied by the lot size to get units.

The answer is in rupees per 1% move: roughly the value of futures a fully hedged book at that strike would need to buy or sell if the index moved 1 per cent. It is usually shown in crore.

The formula is the easy part. The hard part is the sign. Open interest says how many contracts exist, not who holds which side. To turn it into a hedging picture, the model has to assume who the hedgers are and whether they are long or short at each strike. The common convention counts call gamma as positive and put gamma as negative, which amounts to assuming the hedging side is long calls and short puts. Net gamma at a strike is then call exposure minus put exposure. That is a convention, not an observation.

Positive and negative net gamma

Add the net figure across all strikes and the total has a sign.

Positive net gamma is read as the hedging side being long gamma overall. Their re-hedging sells into rises and buys into falls, which leans against the move. Positive readings are commonly associated with narrower, more contained sessions.

Negative net gamma is read as the hedging side being short gamma overall. Their re-hedging buys into rises and sells into falls, which goes with the move. Negative readings are commonly associated with wider swings.

Both describe what hedging would do if the model's assumptions held. Neither says which way the index goes. Other buying and selling can be far larger on any given day.

The flip level

Gamma exposure changes as the index moves, because each strike's gamma depends on how far it is from spot. Recompute the total at a range of index levels and, somewhere near the current price, it usually changes sign. That level is the flip.

With the common convention, the reading tends to be positive on one side of the flip and negative on the other, often positive above and negative below, though that depends on where the open interest sits. The flip is therefore read as the level where the model's description of hedging changes from leaning against moves to going with them.

It is a computed level, not a traded one, and it moves with open interest, implied volatility and time to expiry.

Pinning near expiry

Pinning is the tendency, sometimes seen on expiry day, for the index to settle close to a strike with heavy open interest.

Gamma exposure offers one explanation for it. Close to expiry, gamma at the at-the-money strike becomes very large, and a strike with a lot of open interest near spot can dominate the whole chain's exposure. If the hedging side is long that gamma, their adjustments sell above the strike and buy below it, and those flows lean the index back toward it.

This is the territory of max pain and OI walls, seen from the hedging side. It describes an association, not a rule. Expiries regularly settle well away from the heaviest strike.

A worked example

Nifty is at 24,000. One strike has calls with a gamma of 0.0012 per unit and open interest of 100,000 contracts. The lot size is 65.

Checked against the formula: 0.0012 × 6,500,000 × 24,000² × 0.01 = ₹44,928,000,000, the same answer.

So a 1% move would change the delta of these calls by about 1,872,000 units of Nifty, which is 28,800 lots. Under the common convention, this strike contributes +₹4,492.8 crore per 1% move.

Now suppose the same strike also has 80,000 contracts of puts open. In the pricing model, a call and a put at the same strike and expiry carry the same gamma when their IVs match, so take 0.0012 for both. The puts come to 80,000 × 65 = 5,200,000 units, or ₹3,594.24 crore per 1% move, counted as negative. Net gamma at the strike is 4,492.8 − 3,594.24 = +₹898.56 crore, which is the 20,000-contract difference in open interest worked through the same steps.

Two cautions on the result. It is a straight-line estimate: over 240 points gamma itself changes, so the real figure would differ. And the sign comes entirely from the convention. If the hedgers at this strike were short the calls rather than long, the same arithmetic would carry the opposite sign.

What the measure does not tell you

• Who is long and who is short. The whole sign of the reading rests on an assumption. Open interest cannot show it.
• Whether anyone hedges. Many open options are not delta-hedged, or are hedged with other options.
• Positions as they stand now. Open interest is a snapshot, reported at intervals, and a session's final count settles after the close.
• The inputs it depends on. Gamma comes from a pricing model, which uses implied volatility and time to expiry. Change either and the exposure changes, with no change in positions.
• Direction. Gamma exposure describes positioning and the hedging it might imply. It does not say where the index is going, and a positive or negative reading is not a forecast.

Related

• The Greeks, in the order they matter
• What max pain actually measures
• What a wall of open interest describes
• Reading an option chain, column by column
• The expected move: what the ATM straddle prices in