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Home News1 Business News

GAMESTOP STOCK SHORT SQUEEZE EXPLAINED – GAMESTOP MEME

A Light Hearted Quick Look at Gamestop Stock Short Squeeze With Memes

financialfe by financialfe
in Business News, Company news, general finance, News1, STOCK MARKET FOR BEGINNERS, UK Stock Market, Uncategorized, US stock market
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Well the Gamestop Stock Short Squeeze certainly has provided a bit of entertainment for anybody interested in the stock market. It’s been billed as a David versus Goliath story with the ordinary retailer investor trying to get one over the big bad Hedge Funds.

I’ll try to explain in the briefest non technical of ways what has happened and then we’ll take a look at the odd Gamestop meme or two that have caught my eye this week. I’m never disappointed by those people that come up with these memes within minutes of a big story breaking. You’ve got to feel that their talent could be better served elsewhere for their own gain, but in the meantime they keep us smiling.

Anyway in short the big bad hedge funds decide to short sell Gamestop Stock. In it’s simplest form they sell shares they don’t have at $10 hoping they will fall in value to say $3, at which point they will buy them and pocket the difference. Now these hedge funds don’t operate in hundreds or thousands like the rest of us mere mortals. They operate in Billions and so they have the ability to shall we say move the market. Some people have long commented that this is market manipulation but I couldn’t possibly comment on this.

gamestop stock short squeeze

Back to the story. So we found ourselves in a position where Hedge Funds had heavily shorted Gamestop Stock and whilst they counted their money in their ivory towers waiting for the stock price to decline, the good old retail investor had other ideas. A Reddit group was formed and quickly gathered momentum and size discussing how buy buying the stock they could push the stock price up and therefore cause the Hedge Funds to go in to a big loss position on their short bets. If enough of them could drive enough buying volume this would force the Hedge Funds to have to close their positions at a big loss. The obvious effect of the Hedge Funds closing their positions is the supply and demand effect on the stock price. You have a position where ordinary retail investors buy the stock and push the price up and then the Hedge Funds buy massive amounts of stock to close their position, driving the price up even further.

Now I don’t think the Reddit group in their wildest dreams could have envisaged the size and momentum of the buying they generated as the stock went from the $15 to $20 dollar range a few weeks ago, right up to $380 dollars on Wednesday 27th January. The end result was that when a lot of people tried to sell out at a profit, they found their brokers had either suspended trading or crashed their servers with the volume. This meant a lot of people left sweating holding a stock wondering if it was going to crash below their buying price. Whilst we will probably never know the losses incurred by the Hedge Funds, I suspect they could be vast running in to Billions. For the ordinary retail investor, many will have made a killing but I suspect lots will be caught the wrong side of price movements and even more unsuspecting investors will still be buying the stock blind to what is happening.

My rule of thumb on these situations is that by the time it has hit the mainstream media, it is probably too late to get involved. They are always a risky play so never gamble money you can’t afford to lose.

So on a light hearted footing let’s have a look at some of those funny memes that caught my eye. The world is a quiter place without Donald Trump, so who better than the man himself to start us off.

Gamestop Stock Meme

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