# What Is the Difference between a Gamma Squeeze and a Short Squeeze, and How Do They Interact? ⎊ Path

**Published:** 2025-12-05
**Author:** Greeks.live
**Categories:** Path

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## What Is the Difference between a Gamma Squeeze and a Short Squeeze, and How Do They Interact?

A short squeeze happens when a heavily shorted asset's price rises, forcing short sellers to buy back the asset to cover their positions, which drives the price even higher. A gamma squeeze is caused by market makers buying the asset to hedge the call options they sold.

While distinct, they often interact. A short squeeze can initiate a gamma squeeze, as rising prices make call options more attractive.

Conversely, a gamma squeeze's buying pressure can force short sellers to capitulate, triggering a short squeeze. They can feed into each other, creating an explosive upward spiral.

- [Can the Funding Rate Be Used as a Market Sentiment Indicator?](https://learn.greeks.live/path/can-the-funding-rate-be-used-as-a-market-sentiment-indicator/)

- [How Does the “Funding Rate” Mechanism Work to Keep the Perpetual Swap Price near the Spot Price?](https://learn.greeks.live/path/how-does-the-funding-rate-mechanism-work-to-keep-the-perpetual-swap-price-near-the-spot-price/)

- [How Do Clearing Houses Interact with Other Financial Market Infrastructures?](https://learn.greeks.live/path/how-do-clearing-houses-interact-with-other-financial-market-infrastructures/)

- [How Do the CFTC’s Capital and Margin Requirements for Swap Dealers Enhance Financial Stability?](https://learn.greeks.live/path/how-do-the-cftcs-capital-and-margin-requirements-for-swap-dealers-enhance-financial-stability/)

- [How Does the Contango or Backwardation Market Structure Affect the Cost of Rolling?](https://learn.greeks.live/path/how-does-the-contango-or-backwardation-market-structure-affect-the-cost-of-rolling/)

- [What Is a ‘Short Squeeze’ and How Can Funding Rates Contribute to It?](https://learn.greeks.live/path/what-is-a-short-squeeze-and-how-can-funding-rates-contribute-to-it/)

- [How Can Options Traders Use the “Greeks” (Delta, Gamma, Theta, Vega) to Anticipate Potential Gamma Squeezes?](https://learn.greeks.live/path/how-can-options-traders-use-the-greeks-delta-gamma-theta-vega-to-anticipate-potential-gamma-squeezes/)

- [What Are the Key Differences between a Crypto Death Spiral and a Traditional Market Short Squeeze?](https://learn.greeks.live/path/what-are-the-key-differences-between-a-crypto-death-spiral-and-a-traditional-market-short-squeeze/)

## Glossar

### [Short Squeeze](https://learn.greeks.live/area/short-squeeze/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Momentum ⎊ A short squeeze, within cryptocurrency markets and derivative instruments, represents a rapid and substantial price increase driven by short sellers covering their positions to mitigate losses.

### [Gamma Squeeze](https://learn.greeks.live/area/gamma-squeeze/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

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.

## Discover More

### [How Does a "Circuit Breaker" Mechanism Interact with the Calculation of the Settlement Index?](https://learn.greeks.live/path/how-does-a-circuit-breaker-mechanism-interact-with-the-calculation-of-the-settlement-index/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does a "Circuit Breaker" Mechanism Interact with the Calculation of the Settlement Index?](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Autonomous-Organization-Governance-Mechanism-Propelling-Volatility-Hedging-Instruments-Above-Stratosphere.webp)

It can temporarily exclude or cap extreme prices from the index to prevent volatility skewing the settlement.

### [What Are the Key Differences between a Crypto Death Spiral and a Traditional Market Short Squeeze?](https://learn.greeks.live/path/what-are-the-key-differences-between-a-crypto-death-spiral-and-a-traditional-market-short-squeeze/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Are the Key Differences between a Crypto Death Spiral and a Traditional Market Short Squeeze?](https://learn.greeks.live/wp-content/uploads/2025/10/Quantum-State-Collapse-Mechanisms-Governing-Digital-Asset-Volatility-Hedging-Instruments.webp)

Death spiral is a collapse driven by forced selling; short squeeze is a rally driven by forced buying by short sellers.

### [How Does a Yield Farming Reward (LP Token) Interact with Impermanent Loss?](https://learn.greeks.live/path/how-does-a-yield-farming-reward-lp-token-interact-with-impermanent-loss/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does a Yield Farming Reward (LP Token) Interact with Impermanent Loss?](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Finance-Protocol-Mechanism-Assembly-Illustrating-Staking-Yield-Convergence-and-Volatility-Skew-Adjustment.webp)

Yield farming rewards (governance tokens) are an extra incentive designed to compensate LPs for bearing the risk of impermanent loss.

### [What Is the Primary Way a Short Gamma Position Attempts to Offset the Risk of a Large Price Move?](https://learn.greeks.live/path/what-is-the-primary-way-a-short-gamma-position-attempts-to-offset-the-risk-of-a-large-price-move/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Primary Way a Short Gamma Position Attempts to Offset the Risk of a Large Price Move?](https://learn.greeks.live/wp-content/uploads/2025/10/Intertwined-Quantum-Digital-Asset-Hedging-Mechanism-Through-Option-Strike-Price-Boundaries.webp)

A short gamma position offsets large-move risk through continuous Delta Hedging, aiming to capture Gamma P&L to compensate for potential losses.

### [Define 'Short Gamma' in the Context of Options Trading and Its Risk Profile](https://learn.greeks.live/path/define-short-gamma-in-the-context-of-options-trading-and-its-risk-profile/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Define 'Short Gamma' in the Context of Options Trading and Its Risk Profile](https://learn.greeks.live/wp-content/uploads/2025/10/Crystalline-Geometric-Structures-Illustrating-Decentralized-Finance-Protocol-Volatility-Surface-Contraction.webp)

Short gamma is an option seller's position where sharp price moves force unfavorable rebalancing due to rapid delta change.

### [How Do Volatility and Market Depth Interact to Affect Option Premium Pricing?](https://learn.greeks.live/path/how-do-volatility-and-market-depth-interact-to-affect-option-premium-pricing/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Do Volatility and Market Depth Interact to Affect Option Premium Pricing?](https://learn.greeks.live/wp-content/uploads/2025/10/Oscillating-Asset-States-Representing-Volatility-Skew-in-Decentralized-Finance-Derivative-Pricing.webp)

High volatility increases option premium due to higher price movement probability; low market depth also increases premium due to higher hedging cost/risk.

### [What Is the Risk of "Delivery Squeeze" in Physical Settlement?](https://learn.greeks.live/path/what-is-the-risk-of-delivery-squeeze-in-physical-settlement/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Risk of "Delivery Squeeze" in Physical Settlement?](https://learn.greeks.live/wp-content/uploads/2025/10/Asymmetric-Dual-Winged-High-Frequency-Trading-Vector-Approaching-Lunar-Settlement-Derivatives-Horizon.webp)

A market manipulation risk where a large long position controls the physical supply, forcing shorts to buy at inflated prices for delivery.

### [Why Is a Short-Gamma Position Dangerous in Volatile Crypto Markets?](https://learn.greeks.live/path/why-is-a-short-gamma-position-dangerous-in-volatile-crypto-markets/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Why Is a Short-Gamma Position Dangerous in Volatile Crypto Markets?](https://learn.greeks.live/wp-content/uploads/2025/10/Hydrodynamic-Equilibrium-of-Tokenized-Assets-on-a-High-Frequency-Trading-Surface.webp)

Short Gamma means Delta moves against the price, leading to a rapidly failing hedge and increasing losses during sharp crypto price movements.

### [How Can a Sudden Drop in Trading Volume Lead to a Short-Term 'Liquidity Squeeze' in Derivatives?](https://learn.greeks.live/path/how-can-a-sudden-drop-in-trading-volume-lead-to-a-short-term-liquidity-squeeze-in-derivatives/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Can a Sudden Drop in Trading Volume Lead to a Short-Term 'Liquidity Squeeze' in Derivatives?](https://learn.greeks.live/wp-content/uploads/2025/10/Metallic-Instrument-Precision-Balancing-Crystalline-Sphere-Over-DeFi-Protocol-Interfaces.webp)

A drop in volume reduces market depth, forcing large settlement trades to execute at worse prices, creating a short-term liquidity squeeze.

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