HEDGEWALL
Read The Terminal
Start here: the basics YOU ARE HERE
Who hedges, why it moves the market, and how to read a level. Plain language, no maths.
Every number
Every value on the terminal, one at a time, with its thresholds and its limits.

Price is not the only thing on the board. Someone has to hedge it.

Every screen in Hedgewall answers one question in a different way. Given what is written on the option chain right now, what does the dealer have to do next? This guide teaches the ideas behind those screens in plain language. No maths, no formulas, nothing you cannot check with your own eyes.

Sections
Eleven
Pictures
Sixteen
Formulas
None
Read in
25 min
What is in here
01 The idea everything else rests on

Who is on the other side of your trade

When you buy an option, somebody sells it to you. That somebody is usually a market maker, and their job is not to guess where the market goes. Their job is to earn the small gap between the buy price and the sell price, again and again, all day.

A LOOP THAT NEVER STOPS You buy an option A dealer sells it WANTS THE SMALL GAP Now holds risk WHICH HE DOES NOT WANT Buys or sells the index TO CANCEL THAT RISK FORCED · LARGE · EASY TO SEE COMING The price moves HIS OWN TRADE MOVED IT RISK CHANGES, SO HE TRADES AGAIN GAMMA IS HOW FAST THAT RISK CHANGES WHEN PRICE MOVES
The dealer never stops. Each trade he makes moves the price, and that changes what he has to do next.
Why he cannot just sit still
  • He sold you an option, so now he wins or loses when the index moves.
  • That is a bet, and he does not want a bet. He wants the small gap.
  • So he buys or sells the index itself to cancel it out.
  • That trade is not a choice. It is something he has to do.
Why you should care
  • His trading is forced. There is no opinion in it and no hesitation.
  • It is large. Often larger than the people trading on a view.
  • It is easy to see coming. You can work out the direction before it happens.
Very few things in the market are all three at once. That is why this is worth learning.
The one word you need: gamma
The whole guide
turns on this
  • The dealer's hedge is not set once and left alone. It has to be redone as price moves.
  • Gamma is how fast the hedge has to be redone. Big gamma means constant adjusting.
  • Gamma also has a direction to it, and that direction is the important part.
  • Sometimes his adjusting pushes back against the move. Sometimes it pushes harder in the same direction.
  • Those two cases produce two completely different trading days. That is section two.
Be honest The exchange never tells anyone which side the dealers are on. Hedgewall works it out from how open interest and price moved together. It is a careful reading of the data, not a fact published by anybody. Hold every gamma number at that level of confidence.
02 Two kinds of day

One move, two opposite days

Same index. Same news. Same one percent rally. Which way the dealers are leaning decides whether that rally dies quietly or runs all afternoon.

THE FORK Price goes up 1% THE SAME INPUT Dealers push back POSITIVE GAMMA They SELL INTO THE RALLY The move dies QUIET, RANGE BOUND DAY Dealers push harder NEGATIVE GAMMA They BUY INTO THE RALLY The move keeps going FAST, TRENDING DAY SAME MARKET, OPPOSITE BEHAVIOUR A FALL WORKS THE SAME WAY, JUST MIRRORED
The dealers are doing the opposite thing in each case, and that is what makes the day feel different.
What a push back day feels like
Positive gamma
  • Rallies stall. Falls get bought. Nothing gets very far.
  • The index tends to hang around the same few levels all day.
  • Breakouts fail more often than they work.
  • Big candles are rarer, and the range is narrower than usual.
What a push harder day feels like
Negative gamma
  • Moves keep going once they start.
  • Levels that looked solid give way without much of a fight.
  • Selling a rally is expensive. Selling a fall is expensive too.
  • The range is wider, and the last hour can be violent.
Net GEX, the one number for all of this
Rupees crore
  • Every strike on the chain rolled up into a single number with a plus or minus in front.
  • The plus or minus tells you which of the two days above you are in.
  • The size tells you how strongly. A big number means the effect is hard to fight.
  • A number close to zero does not mean weakly positive. It means gamma is not what is driving today, so go look at something else.
ABOVE +1,000 CrStrong push back. Ranges tend to hold and fades tend to work.
BETWEEN −100 AND +100Flat. Gamma is not today's story. Do not lean on it either way.
BELOW −1,000 CrStrong push harder. Moves run and levels give way.
Be honest This describes how dealers are placed right now. It does not say where the index will close.
03 The switch between them

The flip level

The two kinds of day are not fixed for the whole session. There is a price level where one turns into the other. Above it the dealers push back. Below it they push harder.

Read it as headroom
A price level
  • Find where spot is. Find where the flip is. The gap between them is your room.
  • Wide gap. Today's behaviour is stable and has space to work.
  • Narrow gap. One ordinary move turns the calm day into the fast day.
  • A narrow gap is a reason to trade smaller, before anything has even happened.
SPOT WELL ABOVECalm day with room to spare.
VERY CLOSE TO ITOn the edge. Behaviour can change on a small move.
SPOT BELOWFast day. Moves get pushed along.
A switch, not a target
  • The flip is not a level to buy or sell at.
  • It is the point where every other level on the screen changes meaning.
  • The same wall is a place moves stop above the flip, and a place moves accelerate below it.
CALM SPOT ABOVE FLIP FAST SPOT BELOW FLIP CROSSING THE FLIP one move and every hedge reverses
It works in both directions. Coming back up puts you back in the calm state.

Check the flip before you check anything else that has a price on it.

Because it decides what those prices mean
04 The shape of the day

The corridor and the strike in the middle

Dealer hedging is not spread evenly across all prices. It piles up at particular strikes. Those piles give the day a floor, a ceiling and a centre.

56,200 FLOOR PUT WALL 56,420 FLIP 56,748 SPOT NOW 57,500 PIN HEAVIEST HEDGING 57,800 CEILING CALL WALL A NORMAL DAY MOVES ABOUT THIS FAR. 612 POINTS.
Everything on this picture should be read as a distance from where spot is right now.
The pin
A strike
The heaviest strike on the board
  • The strike where dealer hedging is piled up the most.
  • Price near it tends to get held there, because that is where the hedging is busiest.
  • Never read the pin on its own. Always read it together with how far away it is.
  • A pin sitting right on top of spot is telling you about right now.
  • A pin three hundred points away is telling you about the option chain, not about today's tape.
ALMOST ON SPOTThe busiest hedging is right under the price. Take it seriously.
A SHORT WAY OFFClose by but not doing anything yet.
FAR AWAYTreat it as a point on the map, not a force acting today.
How sure is the pin
Score out of 100
Whether to use the pin at all
  • Hedgewall scores every strike and picks the top one. This tells you how clearly it won.
  • A clear winner means one strike really is holding the board.
  • A near tie means two strikes are sharing the job, so treat them as a zone, not a point.
  • A flat spread of scores means there is no real pin at all, whatever the number says.
70 AND ABOVEOne strike clearly carries the board.
30 TO 69Two or more strikes share it. Read a zone.
UNDER 30No real pin. Ignore it and use the corridor instead.
Floor and ceiling
Two strikes
The edges of the corridor
  • A rally into the ceiling runs into the thickest wall of dealer selling.
  • A fall into the floor runs into the same thing on the way down.
  • Watch whether a wall stays at the same strike as the day goes on.
  • A wall that moves up as price gets closer is being rebuilt higher. That is not the same as being broken.
STAYING PUTSame strike hour after hour. Solid.
GETTING THINNERDraining away as price approaches.
MOVEDThe pile is at a different strike now. The old one is finished.
Be honest This is the single biggest strike, not a group of them. Three medium strikes sitting together can matter more than one tall one on its own.
How far is far
Index points
The measuring stick for every distance
  • The option market has a view on how much the index normally moves in a day.
  • Hedgewall shows that as a number of points. In the picture above it is 612.
  • Compare every distance against it before you decide the distance matters.
  • A level 200 points away when a normal day is 612 points is not really a level. The index gets there on a quiet Tuesday.
WELL INSIDE A NORMAL DAYNot a real distance. Expect price to reach it.
ABOUT A NORMAL DAYA genuine distance worth planning around.
MORE THAN A NORMAL DAYGetting there would be an unusual session.
Be honest This comes from what options cost, which is a price people agreed on. It is not a measurement of what will actually happen.
05 Sharp levels and soft ones

How packed the hedging is

Two days can show the same net number and behave nothing alike. What separates them is whether the hedging sits on a few strikes or is smeared thinly across the whole chain.

PACKED TIGHT SHARP LEVELS THEY HOLD, OR THEY BREAK CLEANLY WORTH TRADING AGAINST SPREAD NORMALLY ORDINARY LEVELS THE USUAL PICTURE USABLE, NOT EXACT SMEARED THIN SOFT LEVELS NO STRIKE CARRIES ANYTHING TRADE ZONES, NOT LINES
Same total hedging in all three. Only the spread is different, and that changes everything about how the day trades.
The packed number
Zero to one
  • One strike holding everything scores near 1. An even spread scores near 0.
  • It has no plus or minus. It does not tell you which kind of day you are in.
  • What it tells you is how much to trust the levels you are about to look at.
  • Hedgewall also splits it by calls and puts, so you can see which side is tighter.
Check this before you trust any single strike on the screen.
HIGH · PACKEDLevels are sharp. Worth trading against.
MIDDLE · NORMALOrdinary. Levels are useful but not exact.
LOW · SMEAREDLevels are soft. Use zones instead of lines.
Is today unusual
Rank against history
  • A packed number on its own means nothing until you know what is normal for this index.
  • Hedgewall ranks today against its own past days and gives you a place in the line.
  • Near the top of the range means unusually sharp levels, which is rare and worth noticing.
  • Near the bottom means the board is unusually loose today.
  • It also shows whether today is tighter or looser than yesterday, which is the direction of travel.
Be honest The ranking is only as long as the history saved so far. With a short history every day looks unusual.
The two extreme strikes
Two strikes and their share
  • One strike is where dealers push back the hardest.
  • Another is where they push hardest in the same direction as the move.
  • The gap between those two strikes is the stretch of prices where the day changes character.
  • Each one comes with the share of the whole board it is holding. Read the share, not the strike name.
  • A strike holding a fifth of the board is a real level. The same strike holding two percent is noise wearing a label.
06 What is actually written down

Open interest, the plain record

Everything so far has been Hedgewall working out what dealers are probably doing. Open interest is different. It is a simple count of how many contracts are open at each strike, published by the exchange. Nobody has to guess at it.

EACH ROW IS ONE STRIKE PUTS CALLS BIGGEST PUT STRIKE BIGGEST CALL STRIKE MAX PAIN. THE CHEAPEST PLACE FOR THE SELLERS AS A GROUP. THE PIN, CARRIED OVER FROM THE HEDGING VIEW
The biggest open interest strikes and the biggest hedging strikes are often not the same strike, and that gap is itself worth reading.
Max pain
A strike
  • The strike where the people who sold the options would pay out the least.
  • It comes from the plain contract count and nothing else.
  • It knows nothing about hedging, so it answers a different question from the pin.
  • When max pain and the pin land on the same strike, the written record and the hedging both point at one place. That is the strongest picture the screen can show you.
  • When they are far apart, trust the pin for questions about how price will behave.
Be honest Max pain assumes every open contract is kept until expiry. In practice most are closed early, so treat it as a rough centre, not a magnet.
Size of the board
Millions of contracts
  • Total open interest is simply how big the whole game is today.
  • Every hedging number scales with it, so a change here changes everything.
  • Hedging jumped but total is flat? People are moving positions around.
  • Hedging jumped and total is rising? That is fresh money coming in.
  • Total falling means today's levels were set by people who have already left.
RISINGNew positions. Levels getting firmer.
FLATShuffling, not building.
FALLINGEmptying out. Levels losing their weight.
The biggest strikes
Two strikes
  • These are the biggest contract counts, not the biggest hedging piles.
  • The two often sit at different strikes and mean different things.
  • Calls sold well above the market are usually people earning income, not people hedging.
  • That makes those levels real but slow. They do not move around much.
  • Put strikes rebuild faster near expiry, as people move their cover down to a new level.
Be honest This counts contracts and nothing else. A strike far from the money counts exactly the same as one sitting on the money.
How busy, and which side
Two ratios
  • How busy compares today's trading against the standing count.
  • Busy means today's positions are being built right now, so levels can shift under you.
  • Quiet means the levels were set earlier and are just sitting there.
  • Which side is the put count against the call count. This is the most over used number in options.
  • Use the way it is moving through the day, never the level on its own.
VERY BUSYPositions changing fast. Levels are not settled.
NORMALAn ordinary day of trading.
QUIETBoard parked. Levels set earlier and holding.
Be honest A count of contracts cannot tell you why somebody opened one. A person buying cover and a person taking a punt look exactly the same here.
07 The board is not frozen

What the dealer has to do next

Everything so far describes the board as it stands right now. Three things change between now and the close, and each one changes what the dealer has to do.

THREE THINGS CHANGE. ONE THING RESULTS. The price moves Time passes Options get cheaper or dearer THE LADDER VIEW THE TIME VIEW THE FEAR VIEW The dealer's gamma DIRECTION AND SIZE What he must trade BUY OR SELL, AND HOW MUCH
Each of the three forward looking views in Hedgewall takes one of these inputs and asks what happens.
If the price moves: the ladder
Size he must trade
at each level
  • A list of price levels above and below where we are now.
  • Against each one, how much the dealer would be forced to buy or sell if we got there.
  • It turns a vague idea about the day into a specific list of things that must happen.
  • Look for the level where the size suddenly jumps.
  • A smooth ladder means the market can absorb the hedging anywhere.
  • A jump means there is one level where dealer trading becomes the biggest thing in the market. Mark it.
WHAT HE IS FORCED TO DO AT EACH LEVEL 1.5% UP1.0% UP0.5% UP 0.5% DOWN1.0% DOWN1.5% DOWN SELL SELL SELL BUY BUY A BIG JUMP
Longer bar means more forced trading. The jump at one and a half percent down is the level worth writing on your chart.
If time passes
Hours from now
  • Time on its own changes the hedge, even if the price never moves.
  • As expiry gets closer the hedging piles up harder around the near strikes.
  • The same number is a much stronger force on expiry day than a week before it.
  • This is why the last two hours of an expiry day feel unlike any other time in the week.
NOW EXPIRY PILES UP FASTER
Days left to expiry quietly scales almost every other number on the terminal.
If options reprice
Cheaper or dearer
  • The same question again, but this time asking what happens if options suddenly get cheaper or dearer.
  • It answers: if the mood changes, does today's calm still hold?
  • A sharp drop in option prices can flip the day without the index doing anything at all.
  • A day that only stays calm at exactly today's option prices is a fragile day.
MUCH CHEAPER TODAY MUCH DEARER BELOW THE LINE IS THE FAST DAY
The dot is where we are today. Follow the line left to see what a sudden calm in option prices would do.
How Hedgewall works out the dealer side
Four cases
  • At every strike, two things are compared. Did the number of open contracts go up or down, and did the price of that option go up or down.
  • Put those two together and you get four cases, each meaning something different.
  • The top row is people opening new positions. The bottom row is people closing.
  • If neither number moved enough to mean anything, Hedgewall leaves the strike blank rather than guessing.
CONTRACTS WENT UP CONTRACTS WENT DOWN OPTION PRICE UP OPTION PRICE DOWN NEW BUYERS PEOPLE OPENING FRESH LONG POSITIONS THE DEALER TAKES THE OTHER SIDE NEW SELLERS PEOPLE WRITING FRESH OPTIONS HERE THIS IS WHERE THE BOARD GETS BUILT SELLERS CLOSING BUYING BACK WHAT THEY SOLD EARLIER WEIGHT LEAVING THIS STRIKE BUYERS CLOSING SELLING OUT OF WHAT THEY BOUGHT WEIGHT LEAVING THIS STRIKE BOARD BUILDING BOARD EMPTYING
Every gamma number in Hedgewall is built on top of this reading, one strike at a time.
Be honest Quiet days break this. On a slow day both calls and puts get cheaper together, simply because time is running out. When that happens across most of the chain, the price side of the test is measuring the clock, not what people are doing, and the whole grid above would read one way for no real reason. Hedgewall spots this and tells you, instead of showing you a confident answer it does not believe.
08 What the market charges

The price of time and the price of cover

How much an option costs is not a forecast. It is a price, agreed on by buyers and sellers. Two simple comparisons make that price tell you something.

Across time
Near month against far
  • Normally the far month costs more, because more can happen in more time.
  • When the near month costs more than the far one, something is upside down.
  • That is what a known event coming up looks like from the inside.
  • People are paying extra for the days right in front of them.
NORMAL UPSIDE DOWN NEAR MONTH FAR MONTH
Two points only. This shows the two ends of the curve, not the shape in between.
FAR COSTS CLEARLY MORENormal. The near term is priced as calm.
ABOUT THE SAMEFlat. No strong view on timing.
NEAR COSTS MOREUpside down. Something near term is being priced in.
Across strikes
Downside against the middle
  • Cover against a fall almost always costs more than a bet on staying put.
  • Because that is always true, the level tells you very little. The change is what matters.
  • Getting dearer means people are buying cover, others are selling it to them, and the floor tends to get pulled closer to the current price.
  • Getting cheaper means cover is being given up, and the bottom edge of the corridor loosens.
  • Cover getting dearer while everything else stays still is about positioning, not about fear.
SPOT FLOOR COVER DEARER, FLOOR COMES CLOSER COVER CHEAPER, FLOOR DRIFTS AWAY
This is the link between what options cost and where the corridor edge sits.
Be honest Two points at a fixed distance apart. It says nothing about the far out strikes, and one thinly traded strike can move the whole reading on its own.
09 Putting it together

The order to read the board in

The order is not a checklist. Each answer changes what the next number means, and one of the answers can end the read early.

START DONE 1. Which kind of day is this? CALM OR FAST. NOTHING BELOW MEANS THE SAME IN BOTH. 2. How much room does it have? SPOT TO FLIP. NARROW MEANS TRADE SMALLER. 3. Can I trust the levels at all? HOW PACKED, AND IS THAT NORMAL FOR THIS INDEX SMEARED Stop here USE ZONES, NOT LINES PACKED 4. Where are the edges? FLOOR, CEILING, PIN. CHECK EACH AGAINST A NORMAL DAY. 5. Do the two views agree? THE PIN AGAINST MAX PAIN 6. Is this board fresh or left over? CHANGE SINCE THE OPEN, AND HOW BUSY TODAY IS 7. What would break this read? TIME PASSING, AND OPTIONS REPRICING
Step three is a gate, not a tick box. A smeared board ends the read before you look at a single strike.

Each answer changes what the next number means. That is why the order is the method.

How to run the board in the morning
10 Learn these the cheap way

Common mistakes

Every one of these is something people do in their first month with a screen like this. Reading them here costs nothing.

INSTEAD OFSeeing a pin at 57,500 and treating it as a target for the close.
DO THISCheck how far away it is first. If it is inside a normal day's movement it is barely a level at all.
INSTEAD OFTrading a wall as support because it was support yesterday.
DO THISCheck the wall is still at the same strike today. Walls get rebuilt at new strikes all the time.
INSTEAD OFReading a put call ratio of 0.79 as bearish or bullish.
DO THISWatch which way it moves through the session. The level on its own has almost no information in it.
INSTEAD OFFading every rally because the screen says it is a calm day.
DO THISCheck the room to the flip first. Calm days stop being calm the moment price crosses it.
INSTEAD OFComparing today's numbers against what you remember from last month.
DO THISUse the rank against this index's own history. Your memory is not a fair comparison.
INSTEAD OFAssuming a big hedging number means big positions were opened today.
DO THISCheck whether the total contract count is rising. Flat total means positions moved around, not new money.
INSTEAD OFUsing the same expiry's levels all week without looking again.
DO THISLook every session. The strike list itself changes, and hedging piles up much harder near expiry.
INSTEAD OFTreating a number as solid because it is printed on a screen.
DO THISAsk what it is measured against, and what would make it wrong. Every panel here tells you.
11 Where it stops

What this cannot tell you

A screen that only shows what it is good at teaches you to trust it in exactly the places where it is weakest. So here is the other half.

It does not know who is short
The exchange never publishes which side the dealers are on. Every hedging number here is worked out from the data, not read off a report.
It is not a forecast
A pin is where the hedging is heaviest. It is not a promise about where the index will close.
It counts, it does not judge
Open interest cannot tell a careful hedge apart from a wild punt. Both are one contract.
The board moves under you
The list of strikes changes during the session, and every number is a snapshot from a moment ago.
The history is short
Rankings against the past are only as good as the days saved so far. A short record makes ordinary days look strange.
Some numbers go blank
Anything built on today's trading is empty outside market hours. Where a number cannot be produced honestly, nothing is shown at all.

A number you cannot check with your own eyes is a number you should not trade.

The rule behind the whole product
12 One line each

Every word in this guide

Dealer
The market maker who sold you the option and now has to hedge it.
Hedge
The trade a dealer makes in the index to cancel out the risk from an option.
Gamma
How fast the hedge has to be redone as the price moves.
Net GEX
All the hedging on the chain as one number, with a plus or minus in front.
Positive gamma
Dealers push back against moves. Calm, range bound day.
Negative gamma
Dealers push moves along. Fast, trending day.
Flip level
The price where the calm day turns into the fast one.
Pin
The strike with the heaviest hedging piled on it.
Corridor
The stretch between the floor and the ceiling.
Floor and ceiling
The strikes with the heaviest put and call hedging.
Open interest
How many contracts are open at a strike. A plain count from the exchange.
Max pain
The strike where the option sellers as a group would pay out least.
Put call ratio
Put contracts against call contracts. Read the direction, not the level.
Strike
The price level an option is written at.
Expiry
The day the option ends. Hedging piles up hard as it gets close.
Wall
A strike with so much sitting on it that price tends to slow down there.
Normal day
How far the index usually moves in a session, taken from what options cost.
Cover
Options bought to protect against a fall.