GameStop is a stock that Redditors of r/wallstreetbets and r/stocks can’t seem to get enough of, and there are many registered losses and significant profits to be found across these subreddits. This article will discuss the origin, development and status of the GME stock.
Who and what caused Gamestop’s incredible surge in stock price? It’s difficult to believe a physical game store would see its stock prices rise even during a pandemic when people are trying to stay inside. It’s possibly even harder to believe that this massive spike in stock price would be driven almost entirely by a Reddit community. However, you need to understand only a few things to get this story. Firstly, you should understand the meaning of the Wallstreetbets subreddit and have a basic understanding of the stock market. If you use Reddit, you’ve probably seen the occasional posts on your front page from the Wallstreetbets subreddit, also referred to as WSB. It’s a subreddit about investing in the stock market. It started out pretty niche but now has about two million subscribers.
Because of the poor value of GameStop’s shares, an idea to influence the stock market arose. Amateur traders in Reddit’s r/wallstreetbets subforum conspired to buy as much GME stock as possible and not sell it. As a result, the number of accessible GameStop shares fell, so short-selling investors had trouble finding inventory to buy or cover.
Short sellers make money when stock prices fall. Short selling is known as “going short” or “shorting,” which seems relatively straightforward. Shorting a stock happens when an investor decides to borrow a stock and sell it, after which investors can repurchase the stock. While this strategy sounds simple, short selling is classified as trading with a margin and should be done only by experienced investors and traders.
What happened after this? Losses started to pile up for significant hedge funds that were short-selling GME. Allegedly, one famous short-shelling hedge funds suffered a year-to-date loss of $19.75 billion in GME stock. This loss was still in the first quarter of the year. A week later, total losses were estimated at $36 billion, as Redditors were still trying to get their hands on new shares. Wallstreetbets and r/stocks had triumphed against the short-selling hedge funds.
Where is GME now, and can I still make a profit? All major trading platforms now support trading for GME. While the stock has surged in price, it has remained static compared to the past results and the stock remains highly volatile. The origin of the stock price surge came primarily from Redditors holding GME stock as a form of protest against significant hedge funds.
Now, shorts only control 9 percent, compared to 90 percent of the stock from the start of 2021. For experienced investors, there is still money to be made on GME stock, but investors should approach with caution as GME has become highly volatile due to inflated market capitalization and popularity among Redditors.
To conclude, we would advise all traders and investors to take all the advice given on Reddit with a grain of salt since it’s difficult to tell who has a lot of experience. Moreover, risk tolerance varies per person, and there is no clear distinction between memes and knowledgeable bits of advice.