Glossary term
Gamma Squeeze
A self-reinforcing rally in which heavy call buying forces short-gamma dealers to buy the underlying as it rises, and that hedging itself pushes price higher.
A gamma squeeze is a reflexive feedback loop driven by options hedging rather than fundamentals. When investors buy calls aggressively, the dealers who sold them are left short gamma: as the underlying rises, each call's delta climbs, forcing dealers to buy more shares to stay hedged — buying that pushes price higher and demands still more buying. The move can feel mechanical and fast because the flow is forced, not discretionary. It is fragile in both directions: once call demand cools or implied volatility falls, the same hedging machinery can reverse into forced selling.