What Is a “Gamma Squeeze” and Is It Relevant in a Death Spiral?

A Gamma squeeze is a rapid upward price movement caused by market makers being forced to buy the underlying asset to hedge their short option positions as the price rises. While a classic death spiral is a downward movement, the mechanism of forced hedging is relevant.

In a death spiral, the inverse occurs: market makers are forced to sell the underlying asset to hedge their long put options (or short call options) as the price falls, which is a Gamma-driven selling cascade, accelerating the spiral.