What is a gamma squeeze?

A dealer who sells a call is short delta, so they buy shares to neutralise it. Gamma is how fast that delta changes as the price moves. Near the strike and close to expiry, gamma is highest, so a small move up demands a large amount of extra stock.

When traders keep buying short-dated, out-of-the-money calls, dealers keep adding to that short gamma position. Every uptick then needs more shares bought, and that buying is what turns a normal rally into a squeeze.

Gamma exposure (GEX) adds up dealer gamma across every strike. A squeeze is most likely when total GEX is negative or close to zero and price sits just below a strike with a large block of call open interest. In that state dealers hedge in the direction of the move instead of against it.

The opposite state, large positive GEX, tends to pin a stock: dealers sell into rallies and buy dips, which damps the move. That is why the same call buying can squeeze one stock and stall in another.

The fuel is new call buying. Once it slows, dealers stop adding hedges. At expiration the calls and their hedges disappear together, and the hedge selling that follows can reverse the move quickly. Squeezes also burn out when implied volatility jumps, because higher IV flattens gamma near the strike.