![]() ![]() There’s a reasonable business case to make for (some of) the game retailer’s valuation there’s also a case that this whole thing has just been quite fun for everyone - the possible trolls of Reddit, market watchers, commentators, and certainly GameStop - except for the short sellers, who have been in for a pretty miserable ride. On GameStop, the answer is probably a mix. It’s not clear how many of them are looking at the underlying fundamentals of companies, or whether they’re just “YOLO-ing” themselves across the market. There has been a lot of hand-wringing about the day-trading trend and this new crop of investors playing the markets, many of whom are treating stocks more like a spin at the roulette wheel than a long-term strategy to build wealth. Goliath story, where David - at least on some fronts - appears to be winning.įamed investor and CNBC personality Jim Cramer called the GameStop drama the “ squeeze of a lifetime.” Bloomberg opinion columnist Matt Levine posited that one possible explanation for what happened could be “utter nihilism” on the part of the Reddit crowd, a story “perhaps best told with a series of rocket emojis.” Or maybe one of the WallStreetBets moderators put it best to Wired: “It was a meme stock that really blew up.” ![]() An army of traders on the Reddit forum r/WallStreetBets helped drive a meteoric rise in GameStop’s stock price in recent days, forcing halts in trading and causing a major headache for the short sellers betting against it and banking on the stock falling. In the GameStop saga, at least, the answer is yes. Sure, small-time investors trade a lot, sometimes to the annoyance of more traditional institutions, but are they really consequential? And one big question amid the frenzy has been how much the little guys really matter. To make more informed decisions on regulating these kinds of events, it is crucial to understand the underlying factors and changes in the finance world that lead to this short squeeze on GameStop by the retail traders on /r/WallStreetBets.Who knew the first big 2021 stock market story would be … GameStop? But here we are.ĭay trading and individual investing have boomed over the past several months, with activity often taking place or being discussed on platforms such as Reddit and Robinhood instead of in more traditional arenas. There are still many questions surrounding the short squeeze that was orchestrated by /r/WallStreetBets. It also should be noted that I participated in the buying of GameStop stock during this time. ![]() The GameStop short squeeze became the first time that many retail traders were able to formulate a plan of this magnitude, and they were able to formulate their plan with the power of social media. This communication to execute /r/WallStreetBets short squeeze occurred on Reddit, a popular social media and news website. By January 28, 2021, Melvin Capital, an investment fund that heavily shorted GameStop, lost 30% of its value since the start of 2021 (Stevens, 2021). The short squeeze made hedge funds lose a vast amount of profit. This 0% commission brokerage firm was top-rated at the time for its simplicity and low barrier for entry on investing. The brokerage of choice for these retail traders was Robinhood. The retail traders on /r/WallSteetBets realized that they would have enough leverage to successfully execute this short squeeze against the hedge funds if they combined their buying power. A short squeeze occurs when a stock or other asset jumps sharply higher, forcing traders who had bet that its price would fall to buy it to forestall even more significant losses. ![]() In early January 2021, a group of retail investors collaborated a short squeeze on GameStop stock, creating an attack against the hedge funds on a popular Reddit trading form called /r/WallStreetBets (Faris, 2021). A group of retail investors has led this change on a Reddit forum known as /r/WallStreetBets These new factors in the stock market have challenged the status quo of the stock market. The introduction of social media in sentimental stock market trading, and new brokerage apps, combined with the new resurgence of retail investors, has led to some interesting results. The world of finance is rapidly evolving - for better or for worse. ![]()
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