A record $2.6 trillion in notional options value traded on the S&P 500, driven overwhelmingly by call buying. The flood of bullish bets created a textbook gamma squeeze, forcing market makers like Goldman Sachs and Morgan Stanley to buy futures and equities to hedge their exposure, pushing prices higher.
On April 1, 2026, the index broke through the 6,500 resistance level with a 100-point intraday gain. The fuel was $7.5 billion in net short gamma exposure on dealers' books. As the market rose, their negative gamma forced more buying, creating a self-reinforcing cycle.
The surge was propelled by two narratives: easing US-Iran geopolitical tensions and continued AI euphoria. Traders are now layering leveraged bets through calls on stocks, indices, and ETFs. Analysts note that derivatives positioning, rather than earnings or economic data, is increasingly the primary short-term price driver.
Once these options expire or are closed out, the forced buying pressure vanishes. History from 2025's AI-driven gamma squeezes in individual names like Nvidia and Tesla suggests sharp rallies are often followed by equally sharp pullbacks. For investors, traditional valuation frameworks become less useful for timing as the options tail wags the equity dog.