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Greeks Exposure

Greek Exposure is a useful tool in the options trader's arsenal that provides a quantified exposure to various risk factors. It can be used to easily estimate how much the value of a held position will change as the price of the underlying asset, time to expiration, volatility and other factors change.🦙 OpFi uses open interest to calculate exposure for gamma (directional and absolute), delta and second order Greeks charm and vanna. In the near future we will add exposure calculation using trading volume to fully analyze the underlying asset. To start analyze Greek Exposure, select an underlying asset such as BTC or ETH or any other available asset, so that we can load the data.

1. Delta Exposure (DEX) - shows how the held position reacts to changes in the price of the underlying asset. It is a direct relationship between a change in the price of the underlying asset and the value of the options portfolio. For example, if the total delta of your portfolio is 100, this means that if the price of the underlying asset changes by one unit, the value of the portfolio will change by $100. In short, DEX indicates that a net long portfolio benefits from upward movements, while a negative DEX indicates that a net short portfolio benefits from downward movements.

Delta Exposure (DEX) = Delta x Open Interest x Spot Price
Total DEX = Call DEX - Put DEX

2. Gamma (Directional) Exposure (GEX). The gamma expressed as the rate of change in delta per one point move in the underlying. To calculate the GEX of an underlying, we need to sum the GEX at each strike price in each available option contract.

Calls GEX (Directional) = Gamma x Open Interest x Spot Price
Puts GEX (Directional) = Gamma x Open Interest x Spot Price x (-1)*

* The -1 adjustment is used because puts represent a short gamma.

Total GEX = Call GEX + Put GEX

Total directional GEX shows whether bulls or bears are dominating the market. For example, if call options have a much larger gamma exposure, this may indicate a higher probability of an upward move.

3. Gamma (Absolute) Exposure provides information about the magnitude of the impact of changes in the price of the underlying asset, but not the direction of that impact.

Calls GEX (Absolute) = Gamma x Open Interest x Spot Price x Spot Price * 0.01
Puts GEX (Absolute) = Gamma x Open Interest x Spot Price x Spot Price * 0.01 x (-1)*

* Multiplication by 0.01 converts the formula into a "percentage" format to show how the market changes when an underlying moves just 1% up or down.

* The -1 adjustment is used because puts represent a short gamma.

Total GEX = Call GEX + Put GEX

Total Absolute GEX is more useful for understanding the overall volatility and risk associated with price changes. It does not tell you the direction (will the price go up or down), but it does show how sensitive the market is to changes in the price of an asset. When the absolute gamma is high, it is as if the market is "on the edge" - any price movement can cause significant changes in participants' positions.

4. Vanna Exposure shows how market participants hedge their positions based on their expectations of future price movements and volatility.

A negative VEX means that most market participants are using puts without much protection against price increases. This may mean that they expect the price to fall and are not very concerned about a possible rise.

A positive VEX indicates that market participants mainly expect the asset to rise. At the same time, they do not seek much protection against a fall in price, as they have minimal insurance through puts.

A positive VEX indicates that market participants mainly expect the asset to rise. At the same time, they do not seek much protection against a fall in price, as they have minimal insurance through puts. Additionally, when volatility increases, large players will buy the asset to balance their positions. This can reduce market declines and stabilize the market as these purchases create support for the price of the asset.

Vanna Exposure (VEX) = Vanna x Open Interest x Spot Price x Implied Volatility
Total VEX = Call VEX - Put VEX

4. Charm Exposure. In a nutshell, Charm (Ddelta/Dtime) is a measure of how the delta of an option changes as the expiration date approaches. As for the Charm Exposure, the following trend can be observed. A negative value indicates that the market is currently under more pressure due to changes in the delta of call options. This may indicate potential risks associated with positions in call options as their delta changes faster or to a greater extent than that of put options. This may make portfolios containing call options more sensitive to changes in the price of the underlying asset.

Charm Exposure (CEX) = Vanna x Open Interest x Spot Price x Time to Expiry (in Years)
Total CEX = Call CEX - Put CEX

Explaining the aggregated view:

You can choose between an aggregated view of Greeks Exposure (GE) analysis and an advanced view of GE analysis. The only difference is that the advanced view shows GE across exchanges. By aggregated view, we mean that we group options by strike, expiration and contract type (Deribit, Binance, ByBit, OKX and CoinCall only). To calculate GE metric, we use the arithmetic mean of the values across all relevant contracts. This approach simplifies the process of analyzing how trader interest is distributed in the options market.

How to change the view:

If you want to analyze Greeks Exposure across exchanges, simply change the view using the "View" button.