Market Maker

Gamma

A second-order Greek measuring how much delta changes per one-dollar move in the underlying. Gamma is highest for at-the-money options near expiry. Long option positions are always long gamma; short options are short gamma. Gamma is the input to gamma exposure.

Hedge

A position taken to offset risk in another position. Long spot can be hedged by buying puts. A short call book is hedged by buying delta in the underlying. Hedging defines market-maker behaviour and is the mechanical reason gamma exposure matters.

Mark Price

The fair value reference used for unrealized P&L and liquidation calculations on a perp or futures contract. Mark price is derived from index price and a moving average to reduce manipulation. Liquidations trigger off mark, not last traded price.

Max Pain

The strike price at which option buyers collectively lose the most at expiry, or equivalently, where total intrinsic-value payouts are minimized. In positive-gamma regimes, dealer hedging pulls price toward max pain into expiry. The pin window is typically the last few hours before settlement.

Mean Reversion

A price tendency to return toward an average level after extreme moves. Mean-reversion strategies fade overextensions. Most viable in positive-gamma, range-bound regimes; risky in trending, negative-gamma regimes.