• 32
  • 26
  • 2

Here's Why GameStop Stock Just Exploded Higher

Motley Fool 2021-02-25

Everyone is gearing up for short squeeze 2.0.

What happened

Shares of GameStop were trading moderately higher on Wednesday until about 1 p.m. EST, when they started gaining a little momentum. Then, seemingly out of nowhere, the stock absolutely exploded higher. Trading was halted several times as it rapidly climbed to finish 104% higher for the day. And it's still climbing after hours.

So what

Earlier this year, GameStop stock had an epic short squeeze, orchestrated by a group on Reddit called Wallstreetbets. This group noticed that short interest for GameStop stock was over 100%. With a clever combination of buying common shares and call options (called a gamma squeeze), the group was able to cause the price per share to go up, forcing many short-sellers to close their positions for massive losses.

When the dust from the short squeeze settled, short interest for GameStop stock plummeted. Only about 40% of the float was shorted as of Jan. 29. More recent data isn't available yet to know what it is exactly today. But the decline in short interest appeared to mark the end of the GameStop saga. The stock fell roughly 90% from peak highs.

Except, apparently, everyone simply regrouped for round two.

Traders were out in full force late this afternoon, bidding GameStop stock back up. To be clear, 40% short interest is still significant enough to spark a mini short squeeze. However, it's possible shorts decided to short GameStop again, thinking it was all over. After all, the stock was still trading more than 10 times where it traded before all of this began. If short interest has increased any since Jan. 29, then this could be a wild ride yet again.

Now what

Last time, many GameStop bulls felt cheated because of the trading restrictions Robinhood and other brokerages put on the stock. In a recent interview with Dave Portnoy, Robinhood's CEO said it moved to restrict trading because it feared an impending liquidity issue if it didn't act. Since then, the company has raised a lot of money, seemingly mitigating this risk. Considering all the negative press it received last time, it's fair to wonder if Robinhood would restrict the buying of GameStop stock again. If it doesn't, it will be interesting to watch just how high GameStop stock can fly.

For me, I'll be watching with interest. But I'm not a GameStop stock buyer today. When I invest, I'm looking for strong companies with long runways for growth. GameStop doesn't fit that description for me.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Report

Comment26

  • Joe00
    ·2021-02-26
    To the ??
    Reply
    Report
  • jeraldlyh
    ·2021-02-25
    to the moon
    Reply
    Report
  • cheryltanat
    ·2021-02-25
    Sell now. Get profit first 
    Reply
    Report
  • mepotat
    ·2021-02-25
    ???
    Reply
    Report
    Fold Replies
    • alicialjw
      Nice you still holding?
      2021-02-25
      Reply
      Report
  • cheryltanat
    ·2021-02-25
    Can buy now? 
    Reply
    Report
    Fold Replies
    • alicialjw
      Diamond hands
      2021-02-25
      Reply
      Report
  • Scuttle_butt
    ·2021-02-25
    Facts.1. Most of those on WSB and using Robinhood changed brokers.2. Hedge funds were manipulating the markets with the ladder attacks dropping the prices3. The tactics mentioned above just bought the hedge funds time and was delaying the inevitable.4. If retail investors weren't selling there's no way for the hedge funds to recover!
    Reply
    Report
    Fold Replies
    • 李育儒
      Hedge funds did covered.


      But it is new short cover old short, t the same stock can be borrowed multiple times.


      It is like using your $5000 paycheck to make $20k loans from 10 banks.
      2021-02-25
      Reply
      Report
  • VileHero
    ·2021-02-25
    That's a very important question. Let me first begin by saying, when I was a boy in Bulgaria... 
    Reply
    Report
  • haoran
    ·2021-02-25
    Round 2 begins! 
    Reply
    Report
  • PhilM
    ·2021-02-25
    Woah 
    Reply
    Report
  • HLPA
    ·2021-02-25
    Well it fits wsb!
    Reply
    Report
  • Baper
    ·2021-02-25
    Is it too late to buy now?
    Reply
    Report
  • bluedolphin
    ·2021-02-25
    Surprisingly
    Reply
    Report
  • siong
    ·2021-02-25
    Still a lot of gas??
    Reply
    Report
  • JJon
    ·2021-02-25
    Risky play but well played
    Reply
    Report
  • WSS
    ·2021-02-25
    Buy some Put option?
    Reply
    Report
    Fold Replies
  • Wangal
    ·2021-02-25
    ?moon
    Reply
    Report
  • Peekapoo
    ·2021-02-25
    Round 2?
    Reply
    Report
  • joechill
    ·2021-02-25
    To the moon 
    Reply
    Report
  • Yongshunn
    ·2021-02-25
    Some say the CFO is the issue [笑哭] . After his firing, stocks rose 100% and another 80% post market. Correlation may not be causation, trade with your own risk [默哀]  $GameStop(GME)$
    Reply
    Report
  • JanLaw
    ·2021-02-25
    Up
    Reply
    Report
    Fold Replies
    • HuatHuat88
      up up to the moon
      2021-02-25
      Reply
      Report
 
 
 
 

Most Discussed

 
 
 
 
 

7x24