Self-reinforcing rally driven by dealers buying stock to hedge short call positions.
When retail buys lots of calls, dealers (option sellers) must buy underlying stock to delta-hedge. Buying pushes stock higher, increasing call deltas, forcing more dealer buying. The 2021 GameStop and AMC episodes were partly gamma squeezes.
Self-reinforcing rally driven by dealers buying stock to hedge short call positions. When retail buys lots of calls, dealers (option sellers) must buy underlying stock to delta-hedge. Buying pushes stock higher, increasing call deltas, forcing more dealer buying. The 2021 GameStop and AMC episodes were partly gamma squeezes.
In derivatives, Gamma Squeeze is one of the building blocks investors use to compare opportunities and assess risk. Understanding it helps you read research notes, earnings reports, and market commentary without getting lost in jargon.
When retail buys lots of calls, dealers (option sellers) must buy underlying stock to delta-hedge. Buying pushes stock higher, increasing call deltas, forcing more dealer buying.
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