Lots of amateur investors are trying to get their hands on a share of GameStop (GME) today, and you probably already know.
But do you really understand the Gamestop hype?
No, you do not, and that’s not a bad thing.
The core of the story is that a bunch of outsiders have played havoc with the traditional workings of the stock market.
This is a case when “short sellers” lose. It happened as they essentially bet on a stock price to go down, but it went up. GameStop went way, way up.
The important thing to remember here is that there is theoretically no limit to how much money a short seller can lose, and in the case of GameStop, some very, very big players are going to take a gut punch and hemorrhage cash.
To be sure, the speculative buying has hit fever pitch levels this week as chat room traders armed with cheaply borrowed funds from the Federal Reserve (and a year of gains in Tesla) gang up to shred Wall Street short sellers.
GameStop shares are winding up into a regular buying frenzy this week, and shares of GME jumped 14%. The heavily shorted video game stock is now up 350% year-to-date.
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