Gamma Squeeze

A gamma squeeze is a self-reinforcing move driven by dealer hedging of concentrated short-gamma exposure: as price rises toward heavily-bought call strikes, dealers hedging those short calls must buy the underlying, pushing price further and forcing still more buying. The loop runs until the positioning clears or expires.

The preconditions are specific: large, fresh option open interest concentrated near the current price (usually short-dated calls), dealers on the short side of it, and enough buying pressure to push price into the strikes. As each strike is breached, dealer deltas jump, mandating more underlying buying - the hedging becomes the fuel.

The same mechanics run downward with puts, where dealer hedging of concentrated short-put exposure adds selling into a decline. In both directions, the squeeze ends when the positions expire, are monetized, or price moves beyond the concentrated strikes - often followed by an equally mechanical unwind.

The label is heavily overused. Most rallies are not gamma squeezes; the term properly applies only when hedging flow from identifiable options positioning is a primary accelerant - and that attribution is an inference from the chain, not something directly observable.