Gamma squeeze
A gamma squeeze is a feedback loop in which heavy buying of options, usually calls, leaves hedgers short gamma, so that each rise in the underlying forces them to buy more of it to stay delta neutral, which pushes the price further toward and through the strikes. It is a mechanism inferred after the fact, not a signal that can be read from open interest alone.
Senzoukria · Glossary · Updated September 2026
At a glance
- Requires
- Option sellers short gamma who hedge with the underlying
- Typical trigger
- Aggressive buying of short-dated out-of-the-money calls
- Amplifier
- Gamma rises as price approaches the strikes
The loop
When clients buy calls, the market makers who sell them become short calls, hence short gamma. To stay delta neutral they buy the underlying. If price rises, the calls' delta rises too, and the market makers must buy more. Because gamma is highest near the strike and for short-dated options, the required buying accelerates as price approaches the strikes that were bought. If that hedging demand is large relative to the underlying's liquidity, it can lift the price further, completing the loop.
Worked example
Hedgers are short 20,000 calls struck at 105, 30 days out, implied volatility 20%, on an underlying at 100. Their delta is 0.205, so the hedge is about 411,000 shares long. At 103 the delta is 0.380 and the hedge must reach 759,000 shares; at 105 it is 0.511, or 1,023,000 shares. A 5% rise therefore requires buying about 612,000 additional shares, before counting any new calls bought on the way up.
| Underlying price | Call delta | Shares held as hedge |
|---|---|---|
| 100 | 0.205 | 411,000 |
| 103 | 0.380 | 759,000 |
| 105 | 0.511 | 1,023,000 |
Why a GEX dashboard may not show it
The widely used gamma exposure convention counts call open interest as dealer long gamma, on the assumption that clients mostly sell calls, for example against stock. A squeeze is the opposite situation: clients buying calls and dealers short them. A dashboard using the standard convention can therefore report positive, dampening gamma exactly when hedgers are short gamma on the strikes being bought. Flow-based readings, which sign each print by its aggressor side, are closer to the mechanism, but they also infer the dealer side rather than observe it.
Limits and the Senzoukria view
- The term is often applied after any sharp rally; the hedging share of the move is rarely measurable.
- Hedgers can use other options, futures or internal netting instead of buying the underlying.
- When the calls expire or implied volatility falls, the hedge is unwound, which can reverse part of the move.
- In Senzoukria, the Calculation assumptions panel lets you flip the dealer positioning convention to see how the key levels change, and Option Flow's Hedging Pressure panel accumulates side × delta × size × 100 of aggressive prints. Neither observes dealer inventories.
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Frequently asked questions
- What is the difference between a gamma squeeze and a short squeeze?
- A short squeeze is driven by short sellers of the underlying buying back their shares. A gamma squeeze is driven by option hedgers buying the underlying as their short-call delta grows. Both can occur together, and both are usually identified after the move.
- Can a gamma squeeze happen on the downside?
- Yes, with puts. If clients buy puts heavily and hedgers are short them, falling prices raise the puts' delta in absolute value and force hedgers to sell more of the underlying. This is the downside counterpart often discussed under negative gamma regimes.