![]() While some may speculate this is a coincidence or a fluke, the possibility of this becoming a more common occurrence is an increasing threat to short sellers around the world. With information more readily available about short positions that companies hold, it allows for others to determine which companies, like GME and AMC, have large short positions held against them. The current information age has presented new challenges for short sellers. Yet it plays an important role in efficient capital markets by facilitating secondary market trading of securities and positively impacting corporate governance and the economy. This strategy tends to receive negative attention in the media under concerns that it is purely speculative and potentially destabilizing for markets. Short selling is the investment strategy that speculates on the decline in a stock or other security’s price and can be used to hedge against the downside risk of a long position in the same security or a related one. To understand why this caused such an uproar, it is important to understand short selling. The bullish run of GME stock was followed shortly after by a similar short squeeze on AMC Theatres (AMC), which benefited from the same driving factors as GameStop, with share prices spiking as much as 52%. This rally, due to the nostalgic love these investors had for the company and to battle against Wall Street, led to a 1,600% increase in the GME stock price and has been marked as one of the most significant bull rushes in stock market history. From here, thousands of people rallied together to buy GME shares to drive up the price and cause the short positions to incur large losses. This is where word of the large shorts being placed against GME came to the mainstage. This forum allows career investors and the average person alike to come together to discuss hot topics in the trading market. ![]() (GME) every day average Joe’s acted as retail investors and pushed back against the shorts placed against GME by the described “1% of Wall Street.” This event was fueled and backed by the popular Reddit forum, WallStreetBets. ![]() These are situations where investors coordinate purchases and drive up the price of certain stocks in order to force short sellers to exit their positions at a loss1. There is also a renewed focus on the issue of more trading regulations, with the SEC to investigate certain platforms that have blocked the purchase of these stocks.In early 2021, Wall Street began seeing high profile short squeezes. The concern many have is that this spectacle will kick off market gamification, with many people trying to play with their money when they could very well lose it. The current Reddit situation paints the picture of a morality tale, with the common people taking a stand against a system that tends to shut them out. There has been a discussion over financial inclusion for quite some time the stock market has been the stomping grounds for a privileged few until now. This battle of Wall Street is bringing up a great deal of questions regarding the future of financial markets. ![]() The Reddit community has been bidding up prices, causing the hedge funds to lose money. This is known as a “short squeeze”, and this is what has happened with this small group of stocks. The risk in this is that there may be a limited amount of stock to borrow prices may go up when you try to get it back. To short sell is to borrow a stock then sell it if the price of the stock falls, you can buy it back at a lower price and return it to the lender. Several managers of hedge funds got wind of these comments, and decided it would be profitable for them to short sell GME stocks. It all started when the Reddit community WallStreetBets commented about how investing in Gamestop (GME) would help turn the company’s declining fortunes around. It turns out the source of this unexpected boom was a community on the social website Reddit, and the result is a “short squeeze” that could change how we approach stock market trading. Last week, the world of stock market trading was abuzz with the rise of Gamestop, AMC, and other companies that many considered to be icons of the past.
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