How Can Options Traders Use the "Greeks" (Delta, Gamma, Theta, Vega) to Anticipate Potential Gamma Squeezes? ⎊ Path

How Can Options Traders Use the “Greeks” (Delta, Gamma, Theta, Vega) to Anticipate Potential Gamma Squeezes?

Traders can anticipate gamma squeezes by monitoring the Greeks. A large concentration of short-dated, out-of-the-money call options indicates high potential gamma.

If the "gamma exposure" (GEX) of dealers is heavily negative, it means they have sold many calls and will be forced to buy the underlying asset if its price rises. High vega can also signal that a spike in implied volatility will have a large impact.

By watching for a buildup of negative dealer gamma and unusual call volume, traders can identify conditions ripe for a squeeze.

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Glossar

Gamma

Parameter ⎊ Representing the second derivative of an option's price with respect to the underlying asset price, this Greek measures the rate of change of Delta, indicating how quickly the hedge ratio needs to be adjusted.

Gamma Squeeze

Leverage ⎊ The Gamma Squeeze, within cryptocurrency derivatives, represents a confluence of options market dynamics where a rapid increase in an asset's price triggers a cascade of call option buying, further accelerating the price surge.