That allows people to wager on whether a stock will rise or fall. Options are bets investors place on a stock, allowing them to buy (a “call” option) or sell (a “put” option) at a particular price. Millions of young people are opting for the latter, which is partly why the sudden surges in GameStop and AMC have caught Wall Street veterans by surprise. You could pay an analyst to tell you what stocks to buy, or you could create a Reddit account and follow forums like WallStreetBets. That technology has democratized investing, giving armchair investors far removed from traditional banks free access to sophisticated trading instruments, like options. The way people trade stocks has been upended by the rise of no-fee apps like Robinhood. The hashtag #SaveAMC was trending on Twitter.īoth AMC and GameStop spiked so rapidly Wednesday they triggered automatic halts designed to protect against volatility. Shares of the new WSB plaything were up more than 200% Wednesday after members of the Reddit board and investors on Robinhood were touting the stock. It’s now $200.Ī similar story was playing out with shares of AMC, the movie theater chain that’s been devastated by the pandemic. On Wednesday, while all three major stock indexes tumbled, GameStop finished up a mind-boggling 134%.įor perspective: One year ago, a single share cost about $4. The reason is two-fold, both of which are far removed from anything related to the company’s fundamental strength: Investors following the Reddit group bought a ton of GameStop options, and short-sellers had to buy shares to cover their losing bids. This week, it rose another 18% then 93% and more than doubled today. The next week, it surged 10% twice and 51% another day. But this wasn’t a normal, momentary stock surge. GameStop’s stock rose a little less than 13% that day. Investors liked that Cohen brought digital experience to the table, something the largely brick-and-mortar GameStop desperately needs, as video games go digital and malls continue their unending slump into irrelevance. The GameStop stock surge began for a legitimate reason: The company announced on January 11 it had added three new directors to its board, including Chewy co-founder Ryan Cohen. A Reddit mob sent its stock more than 200% higher Andrew H Walker/ShutterstockĪMC is today's GameStop. That said, some investors have argued that GameStop was seriously undervalued, especially when video games have become staples of the stay-at-home pandemic era.Ī guest buys tickets on Sep 4, 2020, at the AMC Wayne 14 movie theater in New Jersey, which reopened as Covid-19 restrictions continue to ease. Sales growth is sluggish because gamers no longer need to go to the mall to buy games or consoles. The company is expected to lose money this year and next. It’s not hard to understand why someone would short GameStop, however. If you’ve ever played craps, these are the guys betting against the table, and their tactics, while often lucrative, have burnished their reputation as bloodsuckers and other, unpublishable, names. The popular Reddit page WallStreetBets is fond of targeting short-sellers. The SEC and the White House on Wednesday both said they were monitoring the situation. Some trading platforms, including TD Ameritrade and Robinhood, are restricting trades on AMC and GameStop. We’re now, potentially, at the climax of this movie: GameStop is up more than 1,700% since the start of January. But they’re detested by many Millennials and Gen Zers for creating a house-of-cards financial system that led to the 2008 crisis. These are Wall Street elite, the sort of investors millions of people rely on to make the smart decisions that boost their portfolios. On the other you have hedge funds and short-sellers - those who’ve placed bets that a company’s stock will crash. At least one Reddit user posted that he’d paid off thousands of dollars in student loans with his GameStop On one side you have a band of mostly young day traders who coordinate on Reddit to drive up the share price of struggling companies, including GameStop Who’s the monster and who’s the hero, in this case, depends entirely on your perspective. Everyone knows doom is just around the corner for some key players a lucky few will emerge stronger and the monster might be subdued but will ultimately come back for a sequel. The GameStop frenzy on Wall Street has investors, and much of the internet, enraptured - not unlike a good horror movie.
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