Gamma Squeeze

Is a phenomenon where large price changes in a company's shares or other instruments force investors to make changes in their positions that they do not really want. These forced changes can in many cases affect the price of the instrument in question even more, creating a "vicious" circle for those involved.

A typical example is a "short squeeze". Here, an increase in the price of an underlying instrument can lead to people who have sold shares they do not own (shorter / borrower) having to buy back these sold borrowed shares while the price of the underlying instrument only continues to increase and increase.

A gamma squeeze takes this phenomenon even further, forcing even more share buybacks for the affected party. What is happening here is that issuers (sellers of options) have sold far too many open option positions (unsecured options). If the price then moves in the "wrong" direction, the issuer must quickly buy back the unsecured instrument (cover itself). Then either by buying the actual underlying instrument or as options, but then options that go in the same direction as the options you have sold. Issuers who do not secure their sales can, in theory, take an infinite loss upside in open option positions if they are not covered.

More information about this phenomenon here: