Gamma Squeeze
Runaway dealer buying pressure.
A self-reinforcing rally driven by dealers who are short gamma. As spot rises into heavy call strikes, their net delta grows, forcing more stock purchases, which pushes spot higher and grows gamma further — a positive-feedback loop.
Equivalently, dealer hedge flow ΔH ≈ Γdealer × ΔS. Negative Γdealer means hedge flow and price move the same direction.
- Building: net GEX deeply negative with spot pushing into call-wall strikes.
- Dissipating: spot clears the stack or OPEX rolls off; GEX flips back positive.
- Quiet: net GEX near zero or positive; normal mean-reverting regime.
API Reference
Why Gamma Squeeze Matters for Trading
Squeezes break mean-reversion. When dealers are short gamma, their hedging becomes pro-cyclical — they chase price. Trade with the flow into the wall, fade once it clears.
- What it measures
- The reflexive hedging pressure created by dealer short-gamma exposure colliding with a one-way spot move.
- What it signals
- When options flow is about to amplify — not dampen — realized volatility. Typical setup for blow-off rallies and violent unwinds.
- Why we measure it
- Net GEX tells you the regime; squeeze detection adds path sensitivity via call-wall proximity.
- Who uses it
- Intraday traders, 0DTE scalpers, risk managers sizing overnight exposure.
How to read Gamma Squeeze
- Net GEX deeply negative
- Heavy call OI above spot
- Dealer hedge flow pro-cyclical
- Watch call wall as magnet
- Spot clears the call stack
- OPEX removes gamma
- Unwind can be violent
- Fade breakouts into thin OI
- Net GEX positive or near zero
- Dealer hedging mean-reverts price
- No squeeze risk
- Normal vol regime
Rules of thumb
- Negative GEX is necessary, not sufficient. You also need a directional catalyst and concentrated call OI above spot.
- Short-dated gamma dominates. 0DTE and weekly call stacks produce the fastest squeezes.
- Post-OPEX is the reset. A large chunk of gamma expires monthly — squeeze regimes often reset Friday PM.
- Don't chase exhaustion. Once spot clears the top call strike, hedging flow flips from buying to selling.
- Pair with dealer-hedging analysis. Flow direction depends on dealer sign convention — confirm before trading.
Related Concepts
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