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Gamma Squeeze

Psychohistory Engine Concept — Plain English Explanation

What is Gamma Squeeze?

In plain terms

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.

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.
Failure-to-Deliver / Continuous Net Settlement (CNS)Controlled Demolition Event