Editing Short squeeze (section)

===Gamma squeeze===
The sale of [[naked call]] options creates a short position for the seller, in which the seller's loss increases with the price of the [[underlying]] asset and is therefore potentially unlimited. Sellers have the option of hedging their position by, among other things, buying the underlying asset at a known price at any time before the option is exercised, converting their naked calls into [[covered call]]s. By buying calls, per unit of capital invested, the buyer can create a larger upward pressure on the price of the underlying than they could by buying shares: this pressure is in fact realized when the seller purchases the underlying, and is greater if the seller invests more capital hedging their position by buying the (expensive) underlying than the buyer invests to purchase the (inexpensive) calls.

The resulting upward pressure on the price of the underlying can develop into a [[positive feedback]] loop, as call-sellers react to the rising price by buying the underlying to avoid exposure to the risk that its price may rise further.<ref>{{Cite news |last=Aggarwal |first=DK |title=What happens when stock prices shoot up because of Gamma Squeeze | work=The Economic Times |url=https://economictimes.indiatimes.com/markets/stocks/news/what-happens-when-stock-prices-shoot-up-because-of-gamma-squeeze/articleshow/83059269.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst |access-date=May 30, 2021}}</ref>