Stock markets are based on expectations: future earnings, macro environment, R&D success and more. These views create what is called “Sentiment in the markets”, And when the atmosphere on Wall Street is positive the stock goes up. These days the same optimistic feeling that drives the markets, Became the atmosphere of a college party. WallStreetBets is a kind of investor forum (subreddit) for investors on the popular Reddit site that makes financial sharks a school, not in the positive sense of the word.
Rockefeller, one of the richest men in the United States in the last century, ran to sell his shares on the American stock market after his regular shoe shiner started recommending him investments. The corny story perhaps the story that best describes the situation, after Rockefeller’s panic attack came the great crisis of 1929, we’ll go back to that.
The Reddit site is a kind of social network where users share various content, and those who receive the highest rating appear at the top of the site. The atmosphere on Reddit is more homely than the rest of the social networks, this is where most of the memes come from, and the overall atmosphere is positive full of irony, rudeness, and conspiracy theories. The WallStBets Group is one of the largest in the capital market, and as of this week the group has about 2.9 million degenerates as they call themselves, and about 730,000 of them have bought a lot of options.
The story of GameStop (NYSE: GME) Starts at the well-known research and short company Citron, which has deployed its positions against the company. WallStBets members decided to go to war and hit Citron’s team by short squeezing. They started writing countless exciting posts that managed to run the stock, encouraging each other to buy more and more stocks. The result was that the stock soared by hundreds of percent and Citron closed the position with a huge loss. Andrew Lept, CEO of Citron, tweeted “What Citron has experienced over the last 48 hours is nothing short of embarrassing, a sad interpretation of the state of the investment community,” he added, “We are investors who put safety and our family first, and when we believe they are harmed, it is our duty to stay out of the stock.”
It also shows the gap between institutional investors, those who made the short position, and Robinhood investors, who are pushing GME stock up tonight as well. Why are they pushing? A tweet from Elon Musk, CEO and owner of Tesla (TSLA), who simply wrote “GameStunk”. That was enough to create a buzz about the stock among Robinhood users and the like. (For the full article)
The same speculators buy options and futures, which allow you to buy or sell a stock at the “strike” price in the future for a small initial investment. The gap between whether the derivative is in “inside the money” or “outside the money” can yield a much larger return than buying the stock. WallStBets is not an organized group with a leader at its head, but when it comes to a consensus around a stock with a small market capitalization, things can go crazy.
The new trend in the market, buying stocks with “Short Squeeze” potential. The war on Citron’s shortlisters has created a new viral trend that has spread outside the Reddit districts, hundreds of stocks with high short float (the total stock in short position out of the total shares traded on the market) began to be published on social media and jumped by tens of percent. The party today is in the AMC stock with a high SF ratio, which jumps over 200% after it started “running” in the various groups. It also reached the Israeli Check Point (NYSE: CHKP) although an established company but it has an SF of over 10%, and tonight it is rising by about 3% without special notice while most of the market is falling. More stocks in the trend: Blackberry (NYSE: BB), Sorrento (NYSE: SRNE), Bed Bath & Beyond (NYSE: BBBY), Planetarium (NYSE: PLTR), Robot Island (NYSE: IRBT), Virgin Athletic (NYSE: SPCE) , Nicola (NYSE: NKLA) and more.
The most active stocks, yahoo finance
What is a short squeeze? Short or short selling, is a position against the stock in the expectation that the stock will fall. The difference is in the manner in which the transaction is made, when entering the position the trader borrows shares (from the broker / institutional, etc.) and sells them in the market, when leaving the position the trader buys the shares back and returns to the lender with a certain commission. In a short transaction the profit potential is only 100% while the potential loss is unlimited, as opposed to a long transaction, so the trader is required to deposit money in the MARGIN account. When the stock price rises, there is pressure from the “shortists” to repurchase the stock and minimize losses, and as a result of the sharp increase in demand, there is a sharp rise in the share price called “short squeeze”. Short squeeze occurs in companies with short floats, and usually occurs when the stock reaches its previous high, or trades in declines over a long period of time.
And back to Rockefeller. If you have asked yourself how to spot a bubble, then it is an answer when everyone is talking about a bubble. True, companies today have growth potential that seems endless and profits are at their peak, but the market is priced without the risk component in a zero / negative interest rate environment alongside the mass entry of traders / gamblers rather than investors, inflation. When everyone is talking about a bubble, “sentiment in the markets” cracks, and cases like the WallStBet forum enlarge the crack and make sense of “bubble” rumors. The crack is causing investors like Rockefeller to run away at the peak and leave traders in sharp fix. Investors are waiting for a correction, the market is strong and the long-term “sentiment” is positive, from time to time it takes care to wake us up.
The debate over the formation of the “economic bubble” began between two professors who laid the foundations for the market analysis we use today. Robert Schiller and Eugene Pama, both of whom received the Nobel Prize in Economics in 2013, both developed different approaches to market management. Schiller developed the Schiller PE Index for market valuation, while “Effective Market Theory” is recorded in the name of Pama. (To the full article)
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