What it is
A gamma squeeze occurs when a sudden increase in a stock's price forces market makers, who have sold call options, to buy the underlying stock to maintain a delta-neutral hedge. As the stock price climbs, the delta of their sold call options increases, requiring them to buy more shares to offset their risk. This continuous buying creates additional demand, further pushing the stock price higher.
Gamma squeezes are often initiated by significant buying pressure from retail investors, especially in stocks with high options open interest. As the stock price moves towards the strike price of many call options, market makers must buy more of the underlying stock, creating a feedback loop. This phenomenon can lead to extremely rapid and dramatic price increases, similar to a short squeeze, but driven by options market dynamics.
Why it matters
Understanding gamma squeezes helps explain rapid, options-driven stock price surges, which can create significant short-term volatility and trading opportunities.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice