01
The formula
For each strike K, net GEX is the sum of call and put terms: open interest times gamma times lot size times spot squared times 0.01, with call gamma counted positive and put gamma counted negative. Summed over strikes and expiries, the result is the rupee exposure for a 1% index move.
02
Open interest and lot size
Contract counts and unit counts differ by the lot size. Multiplying a unit count by lot size again overstates exposure by that factor. NSE revises lot sizes periodically, so the value used must be the one in force for the contract, not a constant from an older article.
03
Why Black-76
NIFTY options are European-style and cash-settled against the index, and they are priced off the forward for the relevant expiry. Black-76 takes the forward directly, which avoids needing a separate dividend assumption. The forward is inferred from put-call parity on the chain itself.
Implied volatility comes from the market price of each contract. Gamma is then derived from that volatility and the forward, so a stale or wrong price flows straight into the exposure figure.
04
The sign assumption
Exchange data shows open interest but not whose it is. The standard convention treats dealers as long calls and short puts for sign purposes. It is a modelling choice. State it whenever a GEX figure is shown, and do not present the result as observed dealer inventory.
05
Sanity checks worth running
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Gamma must be non-negative for every contract.
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Implied volatility must be non-negative and the call and put prices must respect no-arbitrage bounds.
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Exposure should scale with spot squared and with open interest, so doubling OI doubles the figure.
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Compare the sum against a second calculation with a different lot-size treatment to catch unit errors.
06
Frequently asked questions
What formula does Arkenwell use for GEX?
Net GEX(K) = sum of (call OI x call gamma - put OI x put gamma) x lot size x spot squared x 0.01, with gamma from Black-76 on the put-call-parity forward. The Methodology page documents it.
Why does GEX differ between providers?
Differences usually come from open interest units, lot size, the volatility model, the forward and the dealer-sign convention.
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