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General TradingG
Gamma Squeeze
A gamma squeeze occurs when heavy call option buying forces market makers to buy the underlying asset to hedge their exposure, driving the price higher. This creates a feedback loop that can cause rapid, outsized price increases, as seen in the GameStop rally of 2021.
Example
“GameStop's stock surged from $20 to over $400 in January 2021 as a gamma squeeze forced market makers to buy shares to hedge their short call exposure, amplifying the rally.”