When retail traders flooded into the shares of GameStop and other shorted stocks, the surge forced the hedge funds stuck in the squeeze to sell off stocks they would have otherwise kept in order to raise funds. That dynamic helped drive the broader stock market down last week and pushed the S&P 500 to a loss of 1.1 percent in January.
Why did GameStop stock drop so much?
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.
Is it safe to Buy GameStop stock on Friday?
Still, while trading will resume on Friday, trading in GameStock remains a high-risk proposition, as the stock's current share price is not justified by the underlying business activity of the company. If you are considering using Robinhood or another brokerage to buy GameStop shares, make sure you understand the dangers of this type of trade.
Is GameStop’s stock volatile?
And, indeed, the shares of GameStop and certain other companies have undoubtedly been volatile in recent days. GameStop stock, which was only recently priced below $20 per share, saw its price climb as high as $350 on Wednesday, while on Thursday share prices ranged from $112 to $483. Find the best stock broker for you among these top picks.
What is the GameStop short squeeze and how did it happen?
This “short squeeze” helped drive GameStop’s share price up as much as 2,000% in a matter of weeks, causing some professional investors to lose billions of dollars. This type of trading – both the shorting and the squeezing – is often known as speculation, because it has nothing to do with the fundamental value of a company.
Why did GameStop stock Get halted?
GameStop GME +6.81% stock dropped suddenly Monday morning, prompting a brief halt due to volatility. The stock fell wider than 15% to as low as $223.00, bounced back, and then fell even lower.
Why did Robinhood freeze GameStop?
Robinhood played a critical role when a group of Reddit posters saw an opportunity to make money while also giving a jab to Wall Street and hedge funds. However, Robinhood made the surprising move to restrict buying GameStop citing issues with volatile stock and regulatory requirements.
How long will GameStop squeeze last?
The typical short squeeze lasts one or perhaps two days, with the major price spikes often happening overnight. GameStop has been broadly rallying for two weeks now, if not longer, with some big swings during trading hours.
Is it legal for Robinhood to restrict trading?
And Robinhood's user agreement clearly states it “may at any time, in its sole discretion and without prior notice to [users], prohibit or restrict [users] ability to trade securities.” While some users are likely to be mad as a result of the sudden restrictions, the user agreement clearly states that Robinhood was ...
Who is the CEO of GameStop?
The company has also announced that Matt Furlong will become CEO while Mike Recupero will become CFO. Both executives come from Amazon.
What are penny stocks?
Let’s take a look away from the headline-grabbing market giants, and head into the world of penny stocks. Traditionally, these were stocks priced at just pennies per share – that’s the old English copper penny, when it was 240 pence to the pound – but nowadays the ‘pennies’ are stocks with share prices under $5. The penny stocks offer retail investors a series of advantages, all connected. Their low price makes the cost of entry to the market affordable – a relatively small investment can net a
Here's why brokers suspended trading in GameStop
Robinhood and Webull were two of the brokers to halt the purchase of GameStop stock on Thursday, along with the shares of other companies including AMC and Koss Corporation. The brokerage firms permitted those who currently held shares of these stocks to sell, but no one could open a new position.
Brokers begin to re-open trades
Amid the outcry, some brokers reversed course late on Thursday. Webull re-opened trades of restricted securities Thursday afternoon, while Robinhood announced that limited trading of restricted stocks would be allowed on Friday.
Using the wrong broker could cost you serious money
Over the long term, there's been no better way to grow your wealth than investing in the stock market. But using the wrong broker could make a big dent in your investing returns.
About the Author
Christy Bieber is a personal finance and legal writer with more than a decade of experience. Her work has been featured on major outlets including MSN Money, CNBC, and USA Today.
Is Robinhood trading on GameStop?
After a day of criticism on social media, Robinhood announced late on Thursday that it would lift its restrictions on Friday and allow at least limited trading of GameStop. "Starting tomorrow, we plan to allow limited buys of these securities," the company said in a statement.
Can you buy GameStop shares on Robinhood?
Image source: Getty Images. Robinhood users can sell GameStop shares, but they can't buy them. Find out why. Robinhood is an online brokerage firm that prides itself on making it easy to buy and sell stocks. But if you're a user of this popular trading platform, you'd have found it impossible to buy a few specific stocks on Thursday.
The cast of characters
Who’s the monster and who’s the hero, in this case, depends entirely on your perspective.
Why GameStop?
The popular Reddit page WallStreetBets is fond of targeting short-sellers. 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. (More on that later.)
Not just GameStop
A similar story was playing out with shares of AMC, the movie theater chain that’s been devastated by the pandemic.
Why is this happening now?
The way people trade stocks has been upended by the rise of no-fee apps like Robinhood. That technology has democratized investing, giving armchair investors far removed from traditional banks free access to sophisticated trading instruments, like options.
Fueling the fire
WallStreetBets, which has more than 2 million followers, is littered with posts cheering the stock gains and no small amount of righteous indignation.
