In the past week, U.S. market headlines have been dominated by the stunning rallies in stocks like GameStop, which has rocketed more than 1,500% since the start of the year. Investors were piling into stocks with a large percent of their shares sold “short” and creating “short squeezes,” or driving traders on the other side of the bet to buy more stock to cover their losses.
Short selling is a strategy in which investors borrow shares of a stock at a certain price in expectations that the market value will fall below that level when it’s time to pay for the borrowed shares.
“It is also very difficult to believe that in this short squeeze, the buy side is completely driven by the retail and there is no institutions jumping in,” he added: “Institutions are not dumb right? They look at these short-squeeze opportunities, they can definitely go in there.”
Retail traders have been largely credited with spawning these rallies, especially investors in the WallStreetBets community on Reddit. The market upheaval has generally been viewed through a populist lens, pitting Wall Street professionals against amateur traders armed with zero-commission trading apps like Robinhood.
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