Have seen this being done for years (primarily by J.P. Morgan and a couple other bank research desks) and am attempting to re-create for my own personal research. I’ve read the forums on here but no one has seemed to crack the code yet; here’s what I have thus far —
I calculated the dollar gamma for each SPX call and put option expiring over the next few weeks by taking 100 * open interest * gamma * spot^2 / 100 and aggregated by SPX strike level (in this case, per every $50 strike — 2650, 2600, 2550, etc.). I then subtracted the dollar call gamma from the dollar put gamma for each strike to generate the ‘P-C imbalance.’
So in essence I now have the current net dollar gamma exposure for all weekly/regular expiration options by strike but am unaware as to how to get something even close to the picture attached. What I get is a normal distribution-type graph (i.e. most gamma centered around the ATM strike) which makes sense since the highest gamma is going to be near the ATM strike with generally a large open interest.
Can anyone help me out here? Is there perhaps some weighting scheme I’m failing to incorporate? Do I need access to dealer data to even conduct this analysis?