AMC and GME Gamma Squeeze vs Short Squeeze duration

BATS:AMC   AMC Entertainment
You are surely wondering how long this rally on GME and AMC could go!

Let's look at the 2021 short / gamma squeezes to find out!

GME rallied from Jan 13 to Jan 28 for 15 days and went up 24X at its peak! That was a gamma squeeze!

AMC, on the other hand, rallied from May 13 to June 2 for 20 days, during which it went up 6X at its peak. That was more of a short squeeze!

A gamma squeeze and a short squeeze are both market phenomena, but they operate in different ways and involve different types of trading strategies.

Short Squeeze:

In a short squeeze, traders who have sold a stock short (i.e., they've borrowed shares and sold them with the intention of buying them back later at a lower price) are forced to buy the stock back at higher prices to cover their positions. This buying pressure drives the stock price even higher, causing more short sellers to cover their positions, thus further increasing the price. It creates a feedback loop where rising prices force short sellers to buy, further increasing demand, and thus prices.
Short squeezes often occur when there's significant negative sentiment or speculation about a stock, and a sudden positive development causes the price to rise sharply, catching short sellers off guard.

Gamma Squeeze:

A gamma squeeze, on the other hand, involves options trading. It occurs when option sellers (who are often large institutional investors or market makers) have sold call options (contracts that give the holder the right to buy a stock at a certain price) and need to hedge their positions by buying the underlying stock. As the stock price rises, they need to buy more stock to maintain their hedge, which further fuels the price increase.
Gamma squeezes are typically triggered by a sharp rise in the underlying stock price, causing the delta (the rate of change of the option price with respect to the price of the underlying asset) of the call options to increase rapidly. This forces option sellers to buy more stock to adjust their hedges, leading to a feedback loop similar to a short squeeze but driven by options trading.

We could be entering a cycle here, let's see!


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