On the predictive power of GEX/Max pain vs a Martingale for SPX 0DTE

There has been a general uptick in chatter around gex as a predictive metric and various services being launched to offer the calculation. I carried out a study using the SPX 0dte data from Massive and Databento. The study runs over a 13 month horizon from June 2025 to July 2026 incorporating about 280 trading days. The open interest data for the contract expiring for the day is used as the initial condition and every trade is then assumed as adding to the open interest (yes this study uses the tick data and captures every single trade). These are very simplifying assumptions and there is simply no way to do any better. The GEX calculation then assumes the classic formulation that the dealers are short puts and long calls. The Quantitively oriented crowd will realize the futility of doing any predictions with these very heavy assumptions but for everybody's sake I present the results below. Remember almost all GEX services sell something based on very similar assumptions. As a control I also use the Martingale prediction which assumes that the current price will be the close. I then calculate prediction errors across all data as the day progresses to get the following plots that include the quartiles. https://preview.redd.it/pc7vktfph7lh1.png?width=842&format=png&auto=webp&s=cd2761235c3450c0f4a4e023e5319cf4d8b806cb https://preview.redd.it/7xb8lh4rh7lh1.png?width=803&format=png&auto=webp&s=cd57bbe762a805657be41d6773ff7e14c05a5c2b https://preview.redd.it/k8bxfaqsh7lh1.png?width=818&format=png&auto=webp&s=113bca08cecc2d8bb77fb57da62d91fd6e59b90f As you can clearly see the Martingale beats the other two with error dropping to 20 bps at slightly past 11:00 am. The max pain strike gets to the same error at 3:00 pm and ends the day slightly below 20 bps. Gamma exposure model does better than the Max pain but it can't beat the Martingale approach either breaching the 20 bps error at around 2:00 pm and ending the day with about 10 bps of error. Martingale converges to the close by definition. There you have it, think twice before paying money for services offering "edge". I would much rather spend the same amount of money to buy some data and use AI assistants to carry out your own analysis and may be you will stumble upon something and also learn a lot in the process.