What Every Investor Needs To Know About GameStop


GameStop Corp. (GME) has the market absolutely captivated right now – a troubled company whose stock suddenly doubles every day will tend to do that.

The stock is up more than 1,822% intraday since Jan. 4. It was trading at $341 at midday yesterday, but had been as high as $380 in pre-market trading.

This is clearly a short squeeze of historic proportions. These kinds of events can and often do spark fast, violent rallies… but when it emerged that most of the short positions had been closed yesterday afternoon, the stock kept rallying.

That's just one reason regular investors are worried that this whole episode might mean the market's turned against them, that they can't trust what they're seeing – or buying – anymore.

I was able to talk to Shah Gilani yesterday afternoon, in this edited interview, to ask him what he thought the biggest, most important takeaways for folks might be.

Most importantly, Shah says "Don't worry." But he had a lot more light to shed on things…

Here's the Truth About the GameStop Short Squeeze

Greg Madison: Hi, Shah – thanks, as always, for talking with us.

Shah Gilani: My pleasure.

GM: So… we've got to talk GameStop here – completely bizarre situation.

SG: Well, it's not quite as bizarre and unprecedented as you might think. Don't get me wrong: It certainly is unprecedented that the "other side" in this short squeeze happens to be hundreds of thousands, maybe even millions of individual investors, loosely coordinating on Reddit, message boards, and so on. That is new, but the basic mechanics and motivations, the opposing forces behind a short squeeze like this are nothing new.

GM: How so?

SG: Well, the hedge funds are doing what hedge funds do; they see what could be juicy short opportunity in a company that's in some trouble, and they go short. That happens all the time. When I started trading 40 years ago, it would happen constantly. Still does.

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Disclaimer: Any performance results described herein are not based on actual trading of securities but are instead based on a hypothetical trading account which entered and exited the suggested ...

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William K. 1 month ago Member's comment

And here we seem to have a different point of view.

Possibly there should be more regulations on buying short? Sometimes it seems, to me at least, that there should be A LOT more regulation on stock trading.