# GEX Rating System

> The GEX rating (1-5) describes the volatility regime for the session - how smooth or violent the tape may trade. It is not a directional signal.

Source: https://tradeecho.com/docs/features/dealeredge/gex-rating-system (updated 2026-08-01)

The GEX rating (1-5) describes the **volatility regime** for the session - how smooth or violent the tape may trade. It is **not** a directional signal.

**Direction** comes from **price vs the Anchor**. The rating tells you **how to size and which strategy types fit the environment**.

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## Rating Overview

| Rating | Regime | Day type | What it usually means |
|--------|--------|----------|------------------------|
| **5/5** | Strongly positive gamma | Very stable | Slow, pin-friendly tape. Premium selling and fades toward the anchor often fit when structure agrees. |
| **4/5** | Positive gamma | Stable | Measured trends and structured breakouts when Anchor and Flip align. |
| **3/5** | Mixed | Neutral / range | No clean volatility regime. Smaller size, defined risk, avoid hero trades. |
| **2/5** | Negative gamma | Volatile | Breakouts can run; reversals can snap. Size down. |
| **1/5** | Strongly negative gamma | Very volatile | Fast, amplified moves. Do not expect a slow pin. Never force short premium here. |

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## Key Distinction

| Question | Answer from |
|----------|-------------|
| Which way is the magnet pulling? | **Price vs Anchor** |
| Will the move be smooth or violent? | **GEX Rating** |
| Is the book stabilizing or expanding vol? | **Price vs Flip** |

**Example:** Rating **4/5** with price **below** the Anchor is a strong **bullish pinning** candidate (magnet up + stable tape). Rating **4/5** with price **above** the Anchor is a **bearish magnet down** in a stable environment - not a automatic "buy calls" read.

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## How Ratings Are Calculated

The rating reflects the **balance of positive vs negative dealer gamma** across the strike grid (and related positioning inputs). In plain terms:

| Positive gamma share (approx.) | Rating |
|----------------------------------|--------|
| 80%+ | 5/5 |
| 60%+ | 4/5 |
| 40-60% | 3/5 |
| 20%+ | 2/5 |
| Under 20% | 1/5 |

Ratings **update intraday** as open interest, expiries, and spot move. Re-check after the open settles and again before the close on 0DTE days.

---

## Strategy Environment by Rating

Direction still comes from **price vs Anchor**. The rating tells you **how** to express the trade.

### 4-5 / Stable (positive gamma)

**Environment:** Pinning, mean reversion, structured breakouts.

**Fits when:**

- Price vs Anchor gives a clear magnet
- Price is **above the Flip** (stable side)
- [Charm](https://tradeecho.com/docs/features/dealeredge/charm-lens) **agrees** with GEX (see [workflow](https://tradeecho.com/docs/features/dealeredge/dealeredge-charm-pulse-workflow))

**Examples:** Iron condors at defense lines, credit spreads, buying dips toward the anchor in a pin setup.

---

### 3 / Mixed

**Environment:** Range, chop, no clean regime.

**Fits when:** You have a level-based plan but expect two-way action.

**Examples:** Smaller size, defined risk, wait for a cleaner tape or confluence before adding.

---

### 1-2 / Volatile (negative gamma)

**Environment:** Momentum, expansion, sharp reversals.

**Fits when:** Price vs Anchor and Flip confirm a breakdown or breakout - not a slow pin thesis.

**Examples:** Long options in the anchor's direction with defined risk, wider stops, reduced size. Avoid naked short premium.

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## Rating + Anchor + Flip = Complete Picture

Use all three before sizing:

1. **Anchor** - directional magnet (below = up, above = down, at = neutral)
2. **Flip** - above = stabilizing regime, below = vol expansion
3. **Rating** - 4-5 = slow/smooth, 3 = mixed, 1-2 = fast/violent

### Common Scenarios

**Scenario 1:** Rating 4/5, price below anchor, above flip  
- **Read:** Bullish pinning playbook - magnet up in a stable environment

**Scenario 2:** Rating 3/5, price at anchor  
- **Read:** Range / premium-selling zone possible - size down, no hero trade

**Scenario 3:** Rating 2/5, price above anchor, below flip  
- **Read:** Bearish magnet + vol expansion - fast downside risk, size down

**Scenario 4:** Rating 1/5, GEX and Charm disagree  
- **Read:** Chop warning - see [Charm Lens](https://tradeecho.com/docs/features/dealeredge/charm-lens) until one force wins

---

## Key Rules

1. **Rating is not direction** - Do not map 4-5 to "buy calls" or 1-2 to "buy puts."
2. **Stable does not mean bullish** - 4-5 means the tape may trade smoothly, not that price must go up.
3. **Volatile means size down** - 1-2 is not "go big directional" - it is "moves can accelerate."
4. **Update through the session** - Especially on 0DTE and OpEx days.
5. **Confirm on Pulse** - Same rating and levels should match on the chart before entry.

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## Related

- [Dealer Edge Quick Start](https://tradeecho.com/docs/features/dealeredge/quick-start)
- [Anchor, Flip, and Defense Lines](https://tradeecho.com/docs/features/dealeredge/anchor-points-defense-lines)
- [Charm Lens](https://tradeecho.com/docs/features/dealeredge/charm-lens)
- [Charm + Pulse Workflow](https://tradeecho.com/docs/features/dealeredge/dealeredge-charm-pulse-workflow)