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  • That article talks a lot about gamma and options, but doesn't mention volatility once.

    The primary pricing factor for options is volatility - And as more people buy volatility / gamma / options (you could use any term in that context), the volatility should rise, making options more expensive.

    Sure - as more call options are sold, the more underlying will need to be bought to hedge (by the seller - the buyers are still unhedged.) - not quite in the way you suggest though - the hedge will cover both losses and exercise.

    Also not mentioned in the article, it's a moving target - as your stock price rises, your option pricing will change - this time because of the increase in actual volatility driven by the changing underlying price (the corollary of vanna & volga in old school options pricing) - again, upwards.

    With a rising price, you might expect demand to fall

    I get a sneaking suspicion that the underlying model assumptions aren't holding true any more, or that something else is happening.

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