How did gamestop stocks rise so much?

How+did+gamestop+stocks+rise+so+much%3F

Guilherme Sorbara, Journalist

 

 

Recently you may have remembered about Gamestop being all over the news due to a huge rise in its stock. The stock went from 65$ per share all the way up to 347.5$ in under 5 days, it  nearly went up by 600%. The cause of this was a short squeeze.

Before I explain how it went up so much I have to explain how the stock market works so you can have some background information. The stock market has many ways of investing. For example some of them are just buying a shares of a stock (a part of the company you are investing in) and hoping the stock will go up so you make more money. The stock market can also be used to make “call options”. If you bet the call option quote will go down and indeed goes down, you will make money. If you bet the option will go down and its quote goes up, you lose money.

Gamestop was going out of business at the time so a lot of people were putting money on the stock going down, But a reddit group with more than 5 million members named wallstreetbets put a lot of money into Gamestop making the stock rise exponentially. His reddit group started to boost it and eventually a lot more people started buying Gamestop shares(part of company) making the value Jump.This caused a short squeeze. A short squeeze happens when a stock jumps quickly forcing traders who bet it would fall to buy it in order to prevent greater losses, But this only helps the stock go up. Since this happened headfunds lost around 13 billion dollars because of this. This was eventually getting out of hand so Robinhood, a stock trading app had to restrict the purchase of gamestop shares making the value dip a lot, It went from 225$ to 90$ per share overnight.

 

https://www.investopedia.com/terms/s/shortsqueeze.asp 

https://www.nytimes.com/2021/01/28/business/gamestop-stock-market.html 

https://lanthorn.com/80122/news/the-gamestop-reddit-wallstreetbets-short-selling-situati

https://www.reddit.com/r/wallstreetbets/ 

https://www.investopedia.com/options-basics-tutorial-4583012#:~:text=Call%20and%20Put%20Options,-Options%20are%20a&text=If%20you%20buy%20an%20options,right%20to%20sell%20a%20stock