6. Options and the volatility desk

Positioning and flow

Open interest, dealer gamma and the tape of big option trades.

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  • 3 lessons
  • 13 min
About this section

Who holds which options, and who is trading them right now: open interest by strike and max pain, the dealer gamma that can calm or amplify moves, and the tape of large option trades.

What you will be able to do

  • Read open interest by strike and expiry, and max pain (OPX).
  • Explain dealer gamma, its flip level, and why it is an estimate (GEX).
  • Read sweeps, blocks and large premium prints, and not over-read them (FLOW).

Five words to know

open interest
contracts still open after a session
max pain
the expiry price where option holders would lose the most in total
dealer gamma
an estimate of how much dealers must buy or sell as the price moves
sweep
an order that takes liquidity on several exchanges at once
premium
the total money paid for an option trade
  1. 01Open interest and max pain (OPX)OPX shows open interest (contracts still open) by strike and expiry, with the put/call ratio and max pain, the expiry price at which option holders would collect least.4 min
  2. 02Dealer gamma (GEX)Dealer gamma (GEX) estimates how much option dealers would trade per 1% move to stay hedged, under an assumption about who holds which option, and where that estimate flips sign.4 min
  3. 03Options flow (FLOW)FLOW is a live tape of large option trades on the busiest US contracts (sweeps, blocks and big-premium prints) with ticker, contract, size, premium and implied volatility.4 min

Educational material about reading market data, not investment advice.