THE CONCEPT LIBRARY
The concept library.
Every idea behind the Orogex map, explained in plain language with worked examples, and sources where research exists. Free, for everyone.
THE UNIFYING IDEA
Dealers take the other side of options trades and hedge the risk, usually by trading the stock or its futures. As prices, volatility and time change, those hedges need adjusting, and the adjustments can cluster at particular prices. Four Greeks describe the changes: delta, the size and direction of the hedge; gamma, how fast it changes with price; vanna, how it changes with volatility; charm, how it changes with time.
CORE CONCEPTS · 11
Gamma Exposure
Gamma exposure (GEX) estimates how much stock dealers would need to buy or sell, for each $1 move, to keep their options hedged, if they hold the positions we assume.
Gamma Squeeze
When dealers are short calls, their hedging can add buying to a rally, and the rally can feed on itself for a while.
Gamma for Futures
Index options are often hedged with index futures, so options positioning can show up on a futures chart.
Delta Exposure
Delta exposure adds up the direction of an options book. A dealer's hedge points the opposite way, so keep the two apart.
Vanna and Charm
Delta can change even when price stands still: when volatility moves (vanna) and as time passes (charm). Both can change dealer hedges.
OpEx Effects
Expiration changes the options book. Near a big expiration, prices have been shown to cluster at heavily traded strikes.
0DTE Flow
Options that expire the same day they trade pack a lot of gamma into the strikes near the price, and almost none into the rest.
Volatility Analytics
Implied volatility is what option prices expect. Realized volatility is what happened. Reading both, over matching windows, tells you what the market is paying for.
Max Pain and Pinning
Max Pain is the settlement price at which outstanding options would pay out the least. It is a reference point, not a target.
Strike-Level Exposure
The total hides where the exposure sits. Looking strike by strike shows which prices actually matter.
Intraday Flow and Unusual Activity
Open interest is counted once a day. Trades during the session hint at how it is changing, but each trade's meaning has to be inferred.
ADVANCED · 3
Higher-Order Greeks
The Greeks change too. Higher-order Greeks measure how fast, which explains why a risk number moves when positions do not.
Volatility Surface Modeling
Raw implied volatilities are noisy. Fitting a smooth surface through them gives cleaner readings, as long as you remember it is a model.
Premium Selling and VRP
Option sellers are paid to carry the risk of large moves. Measuring that payment well, and sizing for the losses, is the whole job.