gamma squeeze
A rally fueled by dealers hedging their call-option exposure.
Definitions
A sharp price rise driven by options market-makers buying shares to hedge the calls they've sold, which forces the price up and triggers more hedging. Central to the 2021 meme-stock mechanics.
gamma squeeze In A Sentence
Origin & Usage
Options-market mechanics term brought to mainstream attention by the GameStop and AMC rallies discussed on r/WallStreetBets.
People Also Ask
What is a gamma squeeze?
It's a sharp price rise driven by options market-makers buying the underlying stock to hedge the call options they've sold. Their hedging buys push the price up, which forces them to buy even more — a self-reinforcing loop.
How is a gamma squeeze different from a short squeeze?
A short squeeze is driven by short sellers buying to cover losing positions, while a gamma squeeze is driven by options dealers buying shares to stay hedged as calls move into the money. They can happen together, as they did in the 2021 meme-stock rallies.
Why did gamma squeezes become well known?
They gained mainstream attention through the GameStop and AMC rallies of 2021, when heavy retail buying of weekly call options is widely credited with amplifying the moves.
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