Word of the Day: "Gamma Squeeze"
A gamma squeeze happens when options traders rush to hedge their positions, causing extreme price moves in a stock. It often starts when many traders buy call options, forcing market makers to buy the underlying stock to stay balanced. This buying pressure drives the stock price higher, leading to a feedback loop of even more buying.
Example: Remember GameStop (GME) in 2021? A gamma squeeze was a key part of its wild price surge.
Why it matters: If you spot a gamma squeeze early, you can ride the momentum—or avoid getting caught on the wrong side of a massive swing.
A gamma squeeze happens when options traders rush to hedge their positions, causing extreme price moves in a stock. It often starts when many traders buy call options, forcing market makers to buy the underlying stock to stay balanced. This buying pressure drives the stock price higher, leading to a feedback loop of even more buying.
Example: Remember GameStop (GME) in 2021? A gamma squeeze was a key part of its wild price surge.
Why it matters: If you spot a gamma squeeze early, you can ride the momentum—or avoid getting caught on the wrong side of a massive swing.