A surge of retail stock trading over the last year lit the fuse that sent shares of GameStop rocketing higher without a clear business reason, market watchers say, squeezing hedge funds that had bet against the retailer and other companies that were out of favor on Wall Street

What is going on? Here are some answers 👇

More individuals have invested in stocks during the COVID-19 pandemic, and experts cite a number of reasons, including lockdowns boosted savings, stimulus putting cash into people’s pockets and extremely low interest rates
Also, a proliferation of trading apps allowed anyone with a smartphone to buy or sell stocks for free. Retail investors’ participation in U.S. equity order flows increased to nearly 20% in 2020 from 15% in 2019, data from Swiss bank UBS showed
What has been the impact of this surge in retail trading?

Big U.S. technology companies were among the beneficiaries last year. Facebook, Amazon, Apple, Netflix and Google saw record inflows as their businesses benefited from lockdowns and their stocks soared
💵 With unprecedented stimulus and easy money policies from central banks, investors then shifted to smaller stocks, especially ones that got beaten down during the pandemic
What's happening on Reddit and social media?

Discussions about stocks on social media platforms such as Reddit, Twitter and Facebook are seen by many analysts as fueling massive share price moves that cannot be explained by fundamental news or traditional valuation metrics
Retail investors have long discussed stocks on social media, but during the pandemic these forums appear to be gaining more influence. Investors pointed to discussion threads such as 'WallStreetBets' on Reddit for driving the surge in GameStop
How has this affected hedge funds and professional traders?

Massive share price swings for no apparent reason have caught Wall Street off guard
Short sellers, or investors who bet the price of a stock would fall, are getting crushed. Melvin Capital, a well-established hedge fund, took massive losses on its bets that GameStop share would fall https://t.co/EEgLeas3ej
Traders scrambling to cover these short positions and prevent further losses had to pay inflated prices, which added more fuel to the rally. Several traders told @Reuters that this phenomenon - a classic short-squeeze - drew in still more retail investors hoping to ride the wave
What are the risks?

With global stock markets surging since March despite the pandemic’s devastation of the real economy, investors and analysts are warning about asset bubbles. If markets turn, overvalued stocks will fall with them https://t.co/6RV2QR96XX

More from Reuters

More from Trading

Option Trading is very difficult to master as there are so many things to understand.

Here is a master thread related that will help a beginner to understand about Options Trading.

A complete course worth Rs 50K for free.

1/ A detailed thread on basics of Option Greeks and how it impacts Options


2/ Basic Option Trading Strategies:

There are many option strategies to trade. But keeping your strategy simple is the key.

In this thread, all the basic option trading strategies are being


3/ What are the things that you should look at before taking any Option


4/ Is Option Selling Possible with Rs 1 Lakh Capital?

Even a beginner can start trading in option selling with capital as low as Rs 1 Lakh.

What are the techniques one can use and how to mitigate the infinite loss risk is shared in this

You May Also Like

I just finished Eric Adler's The Battle of the Classics, and wanted to say something about Joel Christiansen's review linked below. I am not sure what motivates the review (I speculate a bit below), but it gives a very misleading impression of the book. 1/x


The meat of the criticism is that the history Adler gives is insufficiently critical. Adler describes a few figures who had a great influence on how the modern US university was formed. It's certainly critical: it focuses on the social Darwinism of these figures. 2/x

Other insinuations and suggestions in the review seem wildly off the mark, distorted, or inappropriate-- for example, that the book is clickbaity (it is scholarly) or conservative (hardly) or connected to the events at the Capitol (give me a break). 3/x

The core question: in what sense is classics inherently racist? Classics is old. On Adler's account, it begins in ancient Rome and is revived in the Renaissance. Slavery (Christiansen's primary concern) is also very old. Let's say classics is an education for slaveowners. 4/x

It's worth remembering that literacy itself is elite throughout most of this history. Literacy is, then, also the education of slaveowners. We can honor oral and musical traditions without denying that literacy is, generally, good. 5/x