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Stocks of companies either left-for-dead or on life support, including GameStop and AMC Theatres, captured the attention of the nation by screaming higher with eye-popping respective gains of 400% and 277% last week alone on massive volume.
Heavily shorted stocks made up an abnormally high percentage of stock volume on the New York Stock Exchange and Nasdaq Exchange last week. Source: The Wall Street Journal
This week was a wild one for markets that may have long-term implications.Â
It all started with GameStop being the center of what s called a short squeeze, which essentially is when traders bet on a companyâs stock price to fall by a certain date and it instead greatly increases. That leaves the previous investors to buy in order to save themselves from large losses. If the short sellers were successful in the first place, they would be able to make a decent profit, but in this situation, they lose a lot of money.
A Reddit group, WallStreetBets, influenced millions to purchase GameStop, which drove the price up, as GameStop was one of the most shorted publicly traded companies in recent times. This caused broker services such as Robinhood to limit buying, which helped out hedge funds and hurt retail investors â the opposite of the original Robin Hood from stories. Other companies on the list included AMC Entertainment and Bed Bath & Beyond.