Define the Term ‘Short Squeeze’ and How It Can Impact Options Writers

A 'short squeeze' occurs when a heavily shorted asset's price rapidly increases, forcing short sellers to buy back the asset to cover their positions, which further drives up the price. This phenomenon can severely impact naked Call Option writers.

If a short squeeze causes the underlying crypto's price to surge past the strike price, the Call Option writer faces massive, potentially unlimited losses, as they are obligated to sell at the lower strike price while the asset's market price is soaring.