Gamma Squeeze Keeps Taking Stocks to New Highs

US stocks are hitting new highs driven by a gamma squeeze in single-stock call options, particularly in AI names. This 'stock up, vol up' regime is fragile and likely to reverse once dealer hedging capacity is exhausted.

Key Takeaways

• 1.The current US stock market rally is being driven by a 'gamma squeeze' resulting from dealers hedging massive volumes of single-stock call options.
• 2.Retail FOMO is focused on AI-related names like Micron and SanDisk, utilizing geared upside rather than traditional index options.
• 3.A positive correlation between the VIXEQ (weighted average implied vol of S&P 500 stocks) and the S&P 500 returns signals a fragile market regime.

Table of Contents

• Single Stock Calls Are Driving Option Volumes
• Signs of a Gamma Squeeze

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