Weekly mania focused on GameStop Corp. and AMC Entertainment Holdings Inc. still suffer hard Tuesday, following an exchange operator ‘s decision to re – use in the use of borrowed money in another hot market, money.
GameStop shares suffered the biggest ever decline, falling 60% and yielding more than $ 9 billion in market value, despite several posts on online forums such as WallStreetBets Reddit encourages traders to hold on to the shares. AMC fell 41%.
The stereotype came in favor of WallStreetBets after CME Group Inc. raising margin requirements for cash futures, which on Monday posted their biggest one-day raise in more than a decade – a move that many traders have accused of posting on social media posts on merchant purchases. money. On Tuesday, money times fell 10% and the largest currency exchange traded fund fell 8.3%.
Tuesday’s sale came as the popular Robinhood Markets trading app continued to ease the restrictions it took due to last week’s heavy trading. The company reduced the number of stocks facing trading loops to five, and placed further restrictions on the number of shares that users can buy from GameStop, although the stock still carries the limits hardest. Robinhood earlier raised billions of dollars from investors to get out of the ongoing trading frenzy. U.S. lawmakers said they plan to hold hearings on short selling, online trading and the role of social media.
Major indices of the second day of strong advances, extending a recent pattern in which online traders ’preferred assets move in one direction and U.S. blue chips side by side. other. The Dow trades rose 476 points, or 1.6%, to 30687. The overall health of the market differs with the volatility and real behavior shown by the WallStreetBets program, traders said, taking note that GameStop and others are staying up sharply for the year despite Tuesday’s decline.
“There is still more room to return,” said Mohit Bajaj, director of commercial asset trading solutions at WallachBeth Capital. “The downward movement seems to be as remarkable as the upward movement. ”
Higher margin requirements often encourage sales because they force investors who have borrowed money to raise money that they can invest with their brokers. Shares of GameStop and AMC were vulnerable to a decline in part because their gains this year have been so great and because so many dealers driving the rallies have been doing so using borrowed money. Even after a recent decline, GameStop shares have gone up nearly five times this year and AMC has more than tripled.
Traders said the rush to buy money started after some affiliates on online forums suggested that aggressive buying could promote similar benefits to GameStop. Many traders on Reddit forums have complained that they were not behind the exchanges, with some saying that the idea is a practice with hedge funds to reduce interest in GameStop.
Some analysts said Monday’s rise in currency prices was driven by traders driven by the so-called short-term tightening in GameStop and other stocks. Short-term pressure occurs when prices rise forcing bearish investors to sell short assets at a higher price.
But it is impossible to create a brief crunch in the precious metal, Goldman Sachs Group commodity analysts said. To do so, an investor had to hold a large portion of the physical metal – difficult with the cost of doing so in a $ 50 billion market for coins, bars and other investments, as well as regulatory rules. limiting the size of the positions held by individual investors. permission to proceed.
IShares Money Trust, a BlackRock Inc. trading fund, has been dissolved. at the center of the recent rally in the price of the precious metal, depreciating the ETF’s profit for the year. ETFs are a popular way for mom-and-pop investors and day traders to play money prices without touching the metal. But when demand for the ETF jumped in the past few days, it prompted the purchase of movements of the underlying currency, fueling prices.
Now, that rally is emptying and shares of money producers are falling as well. Shares of First Majestic Silver fell 24%, while Hecla Mining fell nearly 20%. Shares of Fresnillo PLC have declined 6.2%.
Short sellers have also withdrawn support from WallStreetBets options, a force that diverted some fuel from the recent rally. Shares of borrowed GameStop and AMC, a proxy for short-term interest, have fallen sharply in the past few days, according to data from IHS Markit.
An investor who shortens a stock makes money if the price goes down and loses money if it goes up. The steep climb of GameStop and AMC in the past few days has caused some hedge funds and investors with deep pockets to make a big loss on their bets against these stocks.
Wall Street is in turmoil over GameStop shares, after members of the popular WallStreetBets forum Reddit promoted a bet on the video game vendor. WSJ explains how options trading drives action and what is involved.
Many online trading platforms and brokers are struggling to cope with the influx of new and growing trading customers. Freetrade, a London-based commission-free trading platform, had so many people trying to buy stocks on its platform on Friday that its foreign exchange partner’s bank cut its processing capacity by 95%.
Some investors just don’t give up on GameStop. The most active options trading deal linked to GameStop has been a bullish call related to the shares jumping to $ 800, Trade Alert data show. GameStop shares fell $ 135 Tuesday to close at $ 90.
“The victims of the failed GameStop test and as Robinhood investors will be storming the gates of capital markets without the size, endgame plan, and price knowledge of a mathematical option to success, ”bond investor Bill Gross said in a statement.
Write to Joe Wallace at [email protected], Amrith Ramkumar at [email protected] and Gunjan Banerji at [email protected]
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