The struggling video game retailer's stock has been making stupefying moves this month, wild enough to raise concerns from professional investors on
The frenzy hit new heights Thursday when several trading platforms limited their customers from making certain trades with
It's all forcing hard questions about whether the stock market is in a dangerous bubble and whether a new generation of traders should be allowed to take full advantage of all the tools and free trades available on their phones, regardless of how reckless they may seem to outsiders. At the same time, champions of the 99% are cheering louder from the sidelines, saying the moves mean that hedge funds,
Here's a look at how we got here:
WHAT IS HAPPENING WITH GAMESTOP’S STOCK?
It’s been maniacal this month. After sitting around
AND THE COMPANY ITSELF?
It’s still struggling.
Enthusiasm has grown for
REDDIT IS INVOVLED, RIGHT?
Yes, particularly those in a group called “WallStreetBets.” Their discussions are full of ideas for the next big trade to jump on, self deprecation and an appreciation of both winning and losing bets, as long as they're bold. They've recently been encouraging each other to keep buying
THAT ALONE PUSHED THE STOCK UP MORE THAN 1,000%?
No. A big reason for that is how deeply hated
WHAT'S A SHORT?
It's how investors can make money off a stock falling. In a short sale, they borrow a share of
WHAT'S A SHORT SQUEEZE?
It's what happened with
DO THESE SMALLER INVESTORS BELIEVE IN GAMESTOP'S BUSINESS?
There's been a flavor of that in the discussions. But lately it's been more about inflicting pain on short sellers, hedge funds and other big financial firms. Many talk about it in terms of evening the ledger with the financial elite, who benefited from years of gains as other people fell further behind.
Buying
“This is for making us work on
WHAT'S THIS ABOUT OPTIONS AND MARGIN TRADING?
They're ways that investors can make a big profit with relatively small payments up front, if the stock moves in the right way. Many of the traders pushing up
When they buy stocks “on margin,” they're using borrowed money, which can supercharge their gains and losses. With options, an investor can buy the right to buy the stock at a later date at a certain price. If the stock hits that target, investors can reap a bigger return than if they simply bought a share. But if it doesn't, it can mean a total loss.
WHERE DOES WALL STREET SEE GAMESTOP'S STOCK ENDING UP?
Much, much lower. Over the long term, a stock's price tends to track with the company's profits, and
IS IT JUST GAMESTOP SWEPT UP IN THIS?
No. Other heavily shorted stocks have been seeing a surge of interest recently as investors look for the next
WHAT ABOUT THE BROADER MARKET?
Critics used to dismiss the moonshots for
DID ANYONE SEE THIS COMING?
Maybe not to this degree. But brokerages have been making it ever-easier for novices to get into the market and trade. Commissions have dropped to zero, and people can trade on their phones. As each barrier to trading has fallen, consumer advocates cheered the broadening playing field. But they also warned it's possible to have too much of a good thing. Too-easy trading could encourage people to make too many trades that are too risky for them.
CAN REGULATORS DO ANYTHING ABOUT THIS?
What sets this case apart is all the communication going on between investors on Reddit, as they goad each other to push
In the end, there may be no way to prevent people from pushing a stock too high and potentially burning themselves. Instead, Spatt said it may be better first to properly educate all these novice investors about the risks of bubbles and overzealous trading.
“A lot of people now feel like they’re empowered, and they don't have to go through the traditional players” of
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