4 Things to Know About the GameStop Insanity
It’s been a weird few days in the stock market, where a video game retailer has suddenly become the center of attention.
By Matt Phillips
The internet and stock market are aflame over GameStop, the video game retailer whose stock is suddenly the darling of day traders who are putting the squeeze on Wall Street’s big players.
The stakes are enormous: The surge in trading has driven GameStop’s value up by $10 billion. Since Tuesday.
GameStop — that feature of malls and shopping centers across the country — was worth about $2 billion in December. Now it is worth $24 billion, roughly the same as the meat giant Tyson and the fuel refiner Valero Energy. On paper, at least.
Exactly why has to do with a mix of traditional investing, rampant enthusiasm, stock-market mechanics and the belief that anyone with a Robinhood account can meme a fortune into existence.
What’s going on?
It’s called a short squeeze, and it involves investors betting on which way a stock will go — up or down. These bets are placed by buying stock options, which we’ll grossly oversimplify here.
Options allow an investor to make money even if the stock itself loses value. Investors who bet against a stock are called “shorts.” In GameStop’s case, the shorts include at least two big hedge funds.
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