GEX Rating System
The GEX rating (1-5) tells you the market's gamma positioning bias and which strategies to use.
Rating Overview
| Rating | Bias | Strategies |
|---|---|---|
| 5/5 | Very Bullish | Calls, bull spreads, CSPs |
| 4/5 | Bullish | Bull put spreads, defined-risk calls |
| 3/5 | Neutral | Iron condors, calendars, butterflies (most common) |
| 2/5 | Bearish | Bear call spreads, long puts |
| 1/5 | Very Bearish | Long puts, bear put spreads |
How Ratings Are Calculated
The rating is derived from four factors:
| Factor | Weight | What It Measures |
|---|---|---|
| Position vs Anchor | 40% | Is price above, below, or at the anchor? |
| Gamma Distribution | 20% | Where is gamma concentrated? |
| Support/Resistance Proximity | 20% | How close is price to key levels? |
| Volume Sentiment (P/C ratio) | 20% | Call vs put flow bias |
Trading Strategies by Rating
5/5 - Very Bullish
Interpretation: Strong positive gamma below price, clear upward bias.
Strategies:
- Long calls
- Bull call spreads
- Sell cash-secured puts
Example: SPX at $6,650, anchor at $6,600, rating 5/5. Buy calls or bull call spreads targeting $6,700+.
4/5 - Bullish
Interpretation: Favorable gamma positioning, but with some resistance overhead.
Strategies:
- Bull put spreads
- Long calls with defined risk
- Ratio spreads
Example: SPX at $6,675, anchor at $6,650. Sell bull put spread (6600/6580) or buy call spread (6680/6700).
3/5 - Neutral
Interpretation: Price near anchor, balanced gamma. This is the most common environment.
Strategies:
- Iron condors (BEST) - Sell premium on both sides
- Calendars
- Butterflies
Example Setup:
- Sell 6600 put / 6700 call
- Buy 6590 put / 6740 call
- Credit ~$2,000
- Range = 6600-6700
2/5 - Bearish
Interpretation: Negative gamma above price, downward bias.
Strategies:
- Bear call spreads
- Long puts
Example: SPX at $6,700, anchor at $6,750. Sell bear call spread (6720/6740) or buy puts.
1/5 - Very Bearish
Interpretation: Strong negative gamma above price, clear downward bias.
Strategies:
- Long puts
- Bear put spreads
Example: SPX at $6,720, anchor at $6,800. Buy puts or bear put spread (6680/6660).
Rating + Anchor = Complete Picture
- Anchor tells you direction (above = bearish, below = bullish, at = neutral)
- Rating tells you strategy (5/5 = aggressive calls, 3/5 = sell premium, 1/5 = aggressive puts)
Always use both together. A 4/5 rating with price below anchor is a strong bullish setup. A 4/5 rating with price above anchor may indicate a bounce - verify with price action.
Common Scenarios
Scenario 1: Rating 5/5, price below anchor
- Action: Strong buy - calls, bull spreads, CSPs
Scenario 2: Rating 3/5, price at anchor
- Action: Sell premium - iron condor, strangle
Scenario 3: Rating 2/5, price above anchor
- Action: Bearish - bear call spreads, long puts
Scenario 4: Rating 4/5, price slightly above anchor
- Action: Cautious - may be mean reversion. Use defined risk (bull put spread) rather than naked calls.
Key Rules
- Don't fight the rating - If it says 3/5, sell premium. Don't buy calls hoping for a breakout.
- Neutral = sell premium - 3/5 is not "do nothing." It's your best environment for iron condors.
- Update daily - Ratings change as gamma and open interest shift.
- Confirm with price action - Rating is a guide, not a guarantee. Check the chart.