Amc stock short squeeze
![amc stock short squeeze amc stock short squeeze](https://i.ytimg.com/vi/VE1yww2-PXU/maxresdefault.jpg)
If you can identify the dip and the peak, it's possible to make money from a squeeze.ĭisclaimer: The information and views provided in this article are solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.It’s home to the most popular e-sports players in the world, has Snoop Dogg on its board of directors, and is followed by an army of 500 million social media followers. What they did was called a short squeeze, a technique in which prices of a given security are falling, but then reverse. Then, as quick as they bought in, the Reddit investors sold, and made a handsome profit. All those hedge fund folks who had shorted the two companies were terrified, and attempted to buy more stock to cover their short positions. Thousands of Reddit readers bought GMS and AMC all at once, which not only stopped the downward spiral but caused dollar-values of the securities to rise. They knew it was primarily due to hedge funds who were betting on a downward pricing spiral. The Reddit traders jumped into the fray when they say the value of GameStop and AMC dropping. Again, if your guess was right, and Company X stock dives, you simply repay your debt to the broker with the, now much cheaper, shares. You don't have any in your inventory, so you borrow some from your broker/dealer, agreeing to repay them the next day, or whenever you mutually decide to settle up. The other way, which is actually more common, is for you to find a willing buyer who wants shares immediately. Your profit is the number of shares you sold, multiplied by the amount of the price drop.
AMC STOCK SHORT SQUEEZE FULL
Your buyer paid full price at the time of the deal. But now, you don't have to spend much to acquire the stock because it costs so much less. When it does, assuming you were correct, you then purchase however many shares you contracted to deliver to your buyer. When you do, you agree on a price with the buyer and do one of two things: you either promise delivery for the following day (or some agreed-upon date in the near future), and wait for the price to fall. Instead, you need only find someone who wants to purchase shares. If you think the price of Company X stock is about to fall, for whatever reason, you certainly don't want to purchase it and hope for the best. The best way to figure it all out is with examples. Shorting, a type of securities selling that gets a much worse rap than it deserves, has been around for more than 100 years, as has its conceptual cousin, the squeeze. None of the above makes any sense unless you have a firm grasp on two concepts: short-selling and squeezes. Reddit's crew of amateur investors watched prices rise significantly, sold at or near the peak, and pocketed extraordinary profits. The big hedge funds, who had sold millions of shares short the previous week, lost huge sums of money covering their short positions. The strategy, completely legal and ethical in every way, worked. For the first time in history, ordinary investors were able to communicate with each other instantaneously and have a direct impact on a company's stock price.Īs some of the major Wall Street hedge funds and brokerage firms were short-selling the two stocks, based on the assumption that prices were about to fall sharply, participants on Reddit decided to buy the stock and see if they could reverse the fall.
![amc stock short squeeze amc stock short squeeze](https://i.ytimg.com/vi/AJh8THhTJXA/maxresdefault.jpg)
This social media activity is what was unique about the whole GameStop/AMC situation. The social news and discussion website, Reddit, was hosting a sub-category for investors that focused on how bad the GMS situation was becoming. Investors weren't excited about the future of either stock's price, and there was a lot of talk in the media about how they were dinosaurs of the entertainment industry. They were both considered outdated, operating with a tired business model that relied on in-person customers in an increasingly cyber, e-commerce era. GameStop (GMS) and AMC Theaters (AMC) are two companies that had something in common during the early months of 2020.
AMC STOCK SHORT SQUEEZE HOW TO
So, in case you missed the key points of the story, one that is bound to change the entire way securities are bought and sold, here are the pieces, which can help you learn about a short squeeze and how to potentially use the technique to your advantage. Have you been wondering what happened with the GameStop/AMC situation from late 2020? Unless you were sequestered in a remote mountain cabin for the latter part of the year, you saw dozens of financial news headlines about the unique situation.