What a chaotic and historic couple of weeks it has been for the stock markets, specifically GameStop. GameStop’s trading volume was in the multimillions, all due to a subreddit group called r/wallstreetbets.
So we figured we could go over exactly what happened to GameStop and what caused this chaos in an influx of volume, price and overall interest in what everyone thought would be a failing company.
A huge part of this was due to a short squeeze caused by millions of buy orders, which drove up the market price for GameStop.
You see, a group of hedge funds were short selling GameStop’s stock and the retail investors of Robinhood (from the subreddit group) didn’t like that and started buying the stock — causing the short squeeze we’re seeing. As a result, the hedge funds lost millions.
So, what exactly is a short squeeze and how can it cause an infinite amount of loss?
Here’s a breakdown of what a short squeeze is and how you can protect yourself in the future.