In a short sale, they borrow a share of GameStop and then sell it. Later, if the stock price does as they expect, they can buy the stock at a lower price and keep the difference. GameStop is one of the most heavily shorted stocks on Wall Street. When a stock is very heavily shorted, a rise in its price can force short sellers to get out of their bets.
To do that, they have to buy the stock, which pushes the stock even higher and can create a feedback loop. Many talk about it in terms of evening the ledger with the financial elite, who benefited from years of gains as other people fell further behind.
Many of the traders pushing up GameStop are smaller-pocketed or novice investors. With options, an investor can buy the right to buy the stock at a later date at a certain price.
If the stock hits that target, investors can reap a bigger return than if they simply bought a share. Much, much lower. Other heavily shorted stocks have been seeing a surge of interest recently as investors look for the next GameStop. American Airlines , BlackBerry and other formerly downtrodden stocks have had extreme swings in price this week. Critics used to dismiss the moonshots for GameStop and others as a sideshow, saying the excess was confined to a few corners of the market.
Rich has been a Fool since and writing for the site since After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time. Having made the streets safe for Truth, Justice, and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio.
His coverage reflects his passion for motorcycles, booze, and guns though not enjoyed all at the same time So follow along as he tries to break down complex topics to make them more understandable and useful to the average investor. Have a story idea? Contact Rich here. I may not be able to respond to every suggestion, but I do read them all! Think an article needs a correction? Reach Rich here. Key Points GameStop's stock has suffered a dramatic haircut in just one month.
It's still early innings for the turnaround story. GameStop needs to prove it can actually deliver on its promise. Because the video game retailer is one of the few so-called meme stocks that actually does still have a future , does the haircut GameStop's shares received mean it's time to buy?
Not yet, and here's why. GameStop is just beginning its turnaround adventure. It has a new management team and board of directors that are like-minded in their vision for the retailer. They want GameStop to shed its vast physical retail footprint, keeping only the most profitable ones, and instead transition to an online-heavy focus.
The pandemic last year showed it's certainly possible. What it proved is that the GameStop brand still has considerable value.
The video game outlet also used the investor frenzy over the stock to its benefit. Both were resisted by its shareholders , causing the theater operator to shelve both plans. IE 11 is not supported. For an optimal experience visit our site on another browser. Follow Select. By Rebecca Rodriguez. Shopping Expert shopping: Gaming chairs. Shopping Upgrade your gaming system with these expert-recommended keyboards.
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