Options market makers adjust hedging strategies in response to changes in gamma exposure, a dynamic that has grown more influential as same-day contracts account for over half of S&P 500 options turnover. Dealers selling options typically enter net short gamma positions, forcing them to buy futures during rallies and sell during declines, which can exacerbate market moves. Conversely, dealers buying options tend to operate with long gamma, selling into strength and buying weakness to act as a volatility buffer.
Gamma measures the rate of change in an option’s delta, a figure that can shift rapidly for zero-days-to-expiration contracts. For example, an at-the-money 0DTE call option can swing from a 0.50 delta to 0.90 delta following a 0.5% move in the underlying index, accelerating hedging flows. The phenomenon known as gamma pinning occurs when dealers with long gamma positions suppress volatility by selling into rallies and buying dips, often anchoring prices near strike levels with high open interest at expiration.
Traders monitor net gamma exposure, or GEX, to assess whether the market is in an amplifying or suppressing regime. The zero-gamma line represents the threshold between these states, with markets above it tending toward volatility amplification and below it toward dampening. Same-day options now account for more than 40-50% of total daily S&P 500 options volume, underscoring their growing role in shaping intraday price action and hedging behavior.
