What In The World Is Going On With GameStop?
Well, the short sellers and put buyers did NOT see this one coming. What on earth is going on with Gamestop’s stock? It’s quite laughable how much this stock has increased within the last week, and how much it will continue to increase. $GME, a gaming company which many, including myself, have seen as a dying breed, similar to blockbuster back in the day, saw its stock close just under $150 per share today, and then jumped after an Elon Musk tweet after hours. The volume of trading is so high that the stock saw multiple halts within the day yesterday, due to volatility. What is causing this madness?
Photo from MarketWatch
In short, no pun intended, the stock has seen such a massive increase not due to a new merger, new quarterly earnings that beat expectations, or anything that would typically push a stock higher. Instead, the stock has increased to this level due to Redditors. Reddit users on a forum wanted to increase the value of the stock, but i'm unsure if they had thought that it would go to this laughable level. The stock had a 52 week low of 2.57 per share. This type of movement within the stock market is unprecedented, and dethroning trusted economic principles which have been put in place years ago.
What are the issues with this? There are various legality issues on this front, for example, how is it legal for an online forum to increase a stock’s price per share like this to benefit them, while having hedge funds lose billions per day? There is a law against “pumping and dumping” which essentially means you’re buying a ton of stock then selling immediately. There are hedge funds which are legitimately down billions of dollars, including one which is down 30% for the year.
How much higher can it go? After hours, the stock surged essentially because Elon Musk tweeted “Gamestonk” with a link to the reddit forum, and $GME saw it’s stock increase to 209.51 at the after hours close. All things considered, if you’re long on this, then you just aren't thinking logically. Over the year, the stock has seen a 3,414.96% increase, but there should be major caution flags thrown up. Stocks like amazon or apple have never done this, so why should we believe the short sellers aren’t correct with their assertion? There will come a point within the next few days, or weeks, that this fiasco ends and the stock plummets, but as of right now you can’t even get your hands on a put unless you have money to throw away. 200 put options are selling for just above $10,000 for simply 1 contract, not even multiple.
I can’t stress this enough, but there are various other ways, which are much safer, to make money in this market. Unless you're extremely risk averse, I would not suggest attempting to jump into this stock.