GameStop short squeeze works against small investors and short hedge fund sellers

Shares of GameStop have risen in recent weeks due to support from individual investors on Reddit. Despite subsequent losses from the open bell, GameStop (GME) shares have risen by about 1,700% this year, from a low of $ 20 to a price of around $ 265 by the end of 2020. It’s an army of investors who are buying shares, mostly to the detriment of hedge funds that have opted against GameStop. The phenomenon is called short squeezing. An investor who believes that the shares will fall borrows and sells the shares in the hope of buying them at a lower price and pocketing the difference before repaying that loan. The problem is that the short seller can be hurt if the borrowed stocks continue to rise. The losses are, in theory, infinite. This creates another buying hobby as short sellers move to repurchase the stock before moving even higher. A Reddite community called Wall Street Bets is leading a complaint against short sellers. Experts say the popularity of online brokers like Robinhood and the increase in fee-free trading make it easier for individual investors to continue to plow in the GameStop stock. The GameStop phenomenon has taken Wall Street by storm – and that’s all in America. The White House said it is looking at a large increase in the stock. Jerome Powell was asked about the president of the Federal Reserve in a press conference on Wednesday. It is not clear how much longer this short tightening can last. TD Ameritrade’s online brokerage, now owned by Charles Schwab, has begun to limit the trading of GameStop and other shares that get pop from Reddit, such as the AMC (AMC) movie theater chain. And Wells Fargo’s financial advisory unit has banned employees from giving clients recommendations about GameStop and AMC. The main concern is for average investors to ignore the long-term risks of GameStop while looking for quick short-term pop. #ChristineRomans #CNN #New.

source