Understanding Gamma Squeezes

The mechanic

When retail traders buy huge volumes of short-dated call options, market makers on the other side of those trades are forced to delta-hedge by buying the underlying stock. As the stock rises, the gamma on those options grows, so dealers have to buy even more stock. That positive feedback loop is a gamma squeeze.

The clearest historical examples are GME in January 2021 and AMC later that year. Both involved heavy short interest plus extreme call option buying in weekly expiries.

What to watch

Unusual call volume vs. the 20-day average, concentrated in weekly strikes above spot. Low float plus high short interest. Rapidly expanding implied volatility on the front of the curve.

Our Gamma Squeeze scanner watches these inputs across the market every few minutes and surfaces tickers that meet the threshold. It is not a crystal ball — it is a filter.

How to trade it (carefully)

Gamma squeezes are asymmetric but violent. They unwind just as fast as they build. Never chase at local highs. Size small, use defined-risk structures (call spreads rather than naked calls), and plan your exit before entering.