New York — After experiencing the thrill of victory by soaring GameStop’s share price alone earlier this year — crushed when it returned to Earth soon — an army of low-funded novice investors sought more Came back.
These unwavering investors have recovered GameStop’s share price from $ 40 in February to over $ 300 after plunging from a peak of $ 347. They are also pulling new stocks in the tide they say they’re heading to the moon, including the lesser-known health insurance company Clover Health Investments.
This second wave of meme stocks is equally staggering, with cinema chain AMC Entertainment soaring from $ 2 earlier this year to $ 62 last week, and professional Wall Street again seeing this rise. I call it illogical. Many of these experts say that the phenomenon of regular small investors stacking stocks all at once and sending them incredibly high disappears, especially after they feel the pain of losing some money. I expected it to be.
Instead, the enthusiasm is enduring, showing how strong these investors remain, at least for now. They are armed on social media and can persuade others to win the same stock. They also have a free trading app that allows many to buy stock options, which makes a bigger profit with less initial cost than buying stock in exchange for a potentially larger percentage of loss. can do.
“Given the tools, they will do amazing things,” said Hossein Azari, CEO of cmorq, a company that helps customers enter cryptocurrencies and advocates a new world of “decentralized finance.” He said.
Azari believes it’s all because he felt that people were left behind when he saw wealthy investors and businesses sucking most of the profits of the economy in recent years. Now they are finding a way to get something for themselves.
“They aren’t trying to prove anything,” he said. “They just want to realize the American dream themselves.”
Some meme stock buyers are enthusiastic about the future finances of the companies they support. Others say in a social media post that whatever the next hot stock is, they’re just trying to monetize. Most people say that as long as other like-minded investors work together to hold shares, they will protect each other and protect their stock prices.
Malcolm Esridge, financial adviser to CIC Wealth on the outskirts of Washington, DC, said his client range wants to talk about meme stocks as well as cryptocurrencies. Ethridge is also young. It states that investors are not the only ones pushing up meme stocks. Just as many requests have been received from his retired client.
“But most of the time, I think they just wanted the pros to tell me why it’s not a good idea to get involved, just to make sure they don’t feel like they’ve missed an opportunity. “He said.
The resurrection of this meme stock is a bit different from previous supernovae. For one thing, it hasn’t pushed down the broader stock market. Back in January, enthusiasts have knocked down the S & P 500 to the worst of the last few months. This is a result of concerns that some hedge funds may have to sell large, irrelevant stocks to raise cash to cover the losses they incur after betting on GameStop’s decline. was.
Some of today’s meme stock winners have traded for investors to make a profit if stock prices fall, but not as much as in January. For example, in GameStop, about the stocks that can be traded. One-fifth is sold empty. Earlier this year, more than 100% of them were effectively short-circuited multiple times.
It seems that this purchasing activity is not so enthusiastic. Call options trading, which later gives buyers the right to buy 100 shares at a fixed price, has recently surged to a two-month high. But it is still below the height set in January.
Last year, single-cap call options trading activity tended to fluctuate due to pandemic economic restrictions, according to Deutsche Bank strategists. Call options trading tended to decline as people left home more often. There are, and the last few weeks are notable as an exception.
So what can delay this phenomenon if there is currently no possibility of sitting on the couch and doing anything other than options trading, even if you haven’t been burned by plunging the price of meme stocks before? Is not it?
Washington regulators and politicians are discussing several options, but nothing has happened yet.
Gary Jensler, chairman of the Securities and Exchange Commission, gave a speech Wednesday, where he once again criticized the “gamed” investment. Many trading apps use features that encourage customers to trade more often. This will increase your app’s revenue, but some studies also suggest that it will reduce the average investor’s revenue.
Gensler said he asked the SEC staff to gather public opinion on this topic. He also staffed with changes to the rules governing stock market plumbing and recommendations on how trading apps route individual investor orders to ensure they get the best execution. Asked.
GameStop said late Wednesday that SEC staff were investigating the trading activity of their own stock and the stock of other companies. GameStop, which was asked to submit documents on May 26, said it did not believe the investigation would adversely affect the company.
According to John Coffee, a professor of law at Columbia University, the SEC and other regulators may seek ways to force trading apps to increase warnings to clients. You can start by clarifying that the risk is higher than buying.
Coffee is skeptical GameStop, AMC, and other companies can keep high prices, but according to the traditional model used by financial analysts, it’s very profitable to look reasonable Must be swiftly and explosively raised. So he’s worried that many retail investors are prepared for big losses in their enthusiasm to ride the wave of meme stocks.
He may not be enough to stop some traders, as he continues to encourage social media posts to stack up on specific stocks, even if the brokerage firm issues more warnings. I admit that there isn’t.
“I believe in consumer protection, but I believe the fool and his money are separated.”
Injured but unyielding meme stock investors are back in search of more | Business
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