In the last episode we covered the gamma flip. This time we zoom in on the two strikes that matter most on a normal day: the call wall and the put wall.

What they are

The call wall is the strike above price with the largest call gamma. The put wall is the strike below price with the largest put gamma. These are the places where dealer hedging is heaviest.

Why price stalls there

As price rallies into a big call strike, dealers who are long those calls sell futures to stay hedged. That selling grows the closer price gets. The same thing happens in reverse at the put wall, where hedging flow turns into buying.

The result is that the walls often cap the day's range. Not always, but often enough that you should know where they are before the open.

When walls break

Walls are strongest when dealers are long gamma. When price is below the gamma flip and volatility is rising, a wall can give way, and when it does the move often speeds up as hedges are unwound.

• Respect the first test of a wall. That is where the best fades usually come from.

• If price holds beyond a wall for more than a few bars with strong delta, stop fading it.

• Walls can move during the day as new positions open. Recheck them after the first hour.

In the HOC Terminal

GEX Levels on HOC Charts draws the call wall, put wall and gamma flip directly on your chart. The Options page shows the full gamma profile so you can see the next big strike if a wall breaks.

Next up: max pain, and why it pulls on price into expiration.