Gamma Squeeze
Idea
A self-reinforcing price spiral: when many people buy call options on a stock, the market makers who sold those options must buy the actual shares to hedge, which pushes the price up, which forces more hedge-buying, and so on. In January 2021 this mechanism drove GameStop from about $17 to $483 in under three weeks.
The engine's definition — word for word
Recursive price-acceleration mechanism triggered when heavy retail buying of out-of-the-money call options forces market makers to algorithmically purchase the underlying stock to hedge accelerating gamma (delta-of-delta) exposure. Market makers selling calls must buy shares to stay delta-neutral as the price rises; the buying drives further price appreciation, forcing further hedging. The January 2021 GME gamma squeeze drove the intraday price from ~$17 to $483 in under three weeks. Distinct from a classical short squeeze but operationally layered — the options gamma squeeze compounds the underlying short-cover pressure.
Walk this on the live map →