January 28 On Wall Street, the funds of individual investors are usually referred to as “silly money”. Institutional investors believe that retail investors are doomed to lose to professional institutions.
However, there is a group called “Wall Street Bet” on the Reddit website in the United States, leading retail investors to stage a short-selling market, causing at least two hedge funds that shorted game stocks, GameStop, to “disarm and surrender”.
The wild purchases of small investors such as retail investors increased the market value of Game Post from $2 billion to more than $24 billion in a few days, and its share price has risen by more than 1,700% since December last year.
In addition to the “game post station”, several well-known stocks that were once popular were also sought after by retail investors.
BlackBerry shares rose nearly 280% this year, and AMC theaters rose nearly 840%.
The New York Times reported on the 27th that the mood of retail investors involved in shorting the market is complex, including “greed, boredom, gloating about being able to teach Wall Street” and incited by comments on social media about getting rich quickly.
Use options as “weapons”
A New York Times report said that compared with the rise of U.S. stocks in the 1990s, stock options have contributed to the wave.
Millions of Americans have lost their jobs or work from home since the outbreak of the coronavirus.
These people have opened stock accounts one after another, trading actively, and boosted the U.S. stock market.
Brokers market options to retail investors, and the selling point is that this kind of trading has less investment and large returns.
Retail investors buy and sell not only stocks, but also call options.
Options trading volume accelerated this year after a record-breaking record year in 2020, according to trading alert data companies.
The Wall Street Journal reported that four of the five largest call option trading days since 1973 occurred in the first few weeks of this year.
On January 27, more than 39 million call options were changed, making it the most active trading day in the history of U.S. stocks.
How to end the retail carnival?
The New York Times quoted some analysts to report that the concentrated activity of call options may force hedge funds that lose money in relevant transactions to sell other portfolios to raise cash, eventually leading to a wider market sell-off.
Steve Sosnick, chief strategist of Yingtou Securities Group, said: “People are forced to raise cash under pressure, which usually means selling the target of profitable investments.”
“How to end?” Sosnick said, “In the end, the bigger the bubble, the louder the burst.
When will it explode? I don’t know.”
The U.S. Securities and Exchange Commission said on the 27th that it is actively monitoring the current market fluctuations.
European retail investors are ready to move.
The success of American retail investors buying “game post stations” has excited the retail investors on both sides of the Atlantic.
On the 27th, the shares of American Universal Sanitary Bedding Company, Finnish Nokia Company, German pharmacy Evotec Company and Polish game developer CD Projekt rose sharply.
“It’s like a wolf pack looking for the weakest sheep in the flock,” Sosnick said.
Ivan Josović, founder of Breakout Point, a short selling and retail data provider, said: “Discussion about short-selling by retail investors is spilling to Europe.
We recently noticed that some European stocks were labeled as the next GameStop by retail investors.
The Financial Times reported that compared with the limited disclosure of short positions in the U.S. stock market, the European Union and the United Kingdom require that investors in areas such as hedge funds that exceed 0.5% of the stock of a company’s stock must be made public.
This will make it easier for sniper funds to short positions.