Gamma Squeeze
A rapid price surge driven by options dealers buying the underlying to hedge call options they sold,…
In plain English
A rapid price surge driven by options dealers buying the underlying to hedge call options they sold, which pushes price up further.
When traders pile into call options, the dealers who sold them hedge by buying the underlying. As price climbs, the hedges need topping up, so dealers buy more, pushing price higher still. That loop is a gamma squeeze.
It became famous in the 2021 meme-stock frenzy. It can reverse just as violently once the buying stops.
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