So yesterday I've got youtube shorted by Traveling Trader talking about Gamma Levels and how it has changed his game in a big way. I've never heard of this. Apparently its not super known because these ideas entered retail around 2020, and haven't spread much due to their seeming complexity.
I've been obsessively trying to understand them today (at work while working), and I now understand not only what they signify but also how Market Makers hedge option chains.
It also brings back memories from a year ago or so when I was trading INTC and saw my orders for options trigger huge re-computes on the exchange side. Clearly this was automated, but I had no idea by who and why... now I understand.
This also, completely, explains the mystery with which I opened this blog recently - that is: why are there well defined, clear, traded levels during extended hours on large instruments? And to add, why do they repeat during day session almost always?
Its due to hedging algos running 24/7 trying to squeeze every % of profit from their very profitable game (spread harvesting). Always chasing neutrality.
Anyway. There is a closed source user indicator on Trading View that shows these levels:
I am so far grasping these few:
GEX FLIP
A sort of reluctant accelerator of the price. Initially pushes back and may result in a B or FB. But once crossed accelerates the price further. Sometimes massively.
But can be quiet the resistance/floor:
CALL WALL / PUT WALL
Notice how they act as ceiling or floor, i.e. repelling forces.
Similarly if the price pushes through the wall, MMs will push the price further in that direction.
VD Trigger
The exact opposite of reluctant accelerator, VD Trigger will eagerly reverse the move.
I will define (for myself) others later, but for now the plan is to see if I can judge the price action using these gamma levels (see if it also matches my tech analysis premises), and trade standard FB, B, BO, Continuation etc.
Here is what they look like:
Notice the epic reversal yesterday from where VD Trigger is and where Post/Pre market resistance was. Absolutely incredible.
This is ridiculously powerful. You can literally see the forces behind the chart levels!
And now this absolute banger, look at that clean massive FB against GEX Flip!!!
This feels huge, like a chat code.
Gamma levels give you extra layer of support for your trades, in addition to existing levels.
Random thought
I am so amazed right now. For instance in this image I have an older level I've drawn BEFORE I discovered Gamma levels. Yet the older level matches Max Pain perfectly.