Gamma Squeeze
A rapid, self-reinforcing upward move in an underlying driven by dealer delta-hedging when call buying overwhelms put buying and pushes dealers into a heavily short-gamma position. As the underlying rises, dealers must buy more to keep their delta hedge, which pushes the price higher and forces more buying. The 2021 meme-stock episodes showcased the dynamic in single names. Gamma squeezes typically resolve as call buyers take profit, dealers unwind hedges in reverse, and the move retraces -- a reminder that the mechanism is mechanical rather than fundamental.
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Related terms
American Option · Asian Option · Barrier Option · Basket Option · Butterfly Spread · Calendar Spread
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