GameStop Stock GME, AMC and REV changing the stock market. Are reddit wallstreetbets groups here to stay?

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Wall street hedge fund managers are losing sleep at night stuck in major short squeezes on stocks like GME, AMC, and REV.

There are complaints that unsophisticated retail traders are working together to squeeze the short positions of wealthy Hedge Fund Investors. Hedge funds have lost billions over the last week trying to short stocks like GME, AMC, and REV. Some of these hedge funds have had margins calls where they are forced to sell shares of their “Blue Chip Stocks” in order to cover their short positions.

What happens is a group of retail investors on a message forum like Reddit decide to work together and buy the shares of a thinly traded and low float stock. This buying pressure causes the stock to move up quickly.

You then have major hedge funds who believe the stock will fall short the stock. What that means is they will borrower shares and sell those borrowed shares with the promise of buying back the shares at a later time. If they sell a share short at $40 and the stock price falls to $20 they could buy back the share and the net different minus the short interest would be their profit.

Unfortunately if a short position doesn’t go their way there is no limit to their losses. Tesla was a prime example of that. Billions were lost shorting Telsa stock this year. The price kept going up and up and short sellers were forced to buy back much higher.

The reason stocks like GME,AMC, and REV are so prone to short squeezes is, because they have low floats and high short interest. If the stock moves up and short sellers are forced to cover (buy back) their shares then they are competing with other buyers. The buying frenzy pushes the stock up quickly. This attracts more short sellers. If the stock keeps going up these short sellers will have what is a called a margin call. This is where they will be forced to exit their short position and rapidly buy back the shares.

GME and AMC have experienced major short squeezes and it looks like REV may be next do to the high short interest, Low Float, and huge accumulation.

Wealthy Hedge Funders have started to play dirty. They have started contacting Broker Platforms like TD Ameritrade and others asking them to not allow people to buy GME. They have also tried to force Reddit and Discord to take down the investment group WallStreetBets.

It will be interesting to see who wins out in this battle. The old Wealthy Hedge Funds or the new Retail Investors working together.

About Travis Garlick 1803 Articles
Been writing about and trading stocks since 2013. Manage a group of micro-cap investors on Facebook with over 15,000 members. Turned $8,500 into 185k the first year I started trading stocks and haven't looked back.