> Recently Ian Carroll posted an overview [2] on X where he attempts to untangle the mess of the chaos surrounding Gamestop and its stock. I'm not going to pretend to understand the (dys?)function of our financial markets or everything that he shared, but my eyes are peeled.
So just so you're aware... this is not a good source for financial understanding. This is the financial equivalent of someone who struggled with high school physics going to the Wikipedia article on quantum chromodynamics to then turn around and explain it to you.
Like, the explanation of derivatives is wrong. Leverage has nothing to do with derivatives; derivatives are essentially trades that are trading on the value of another asset rather than the asset itself.
The short answer as to what has happened is GameStop is a video game retailer that hasn't been managing the trend to digital distribution. For $REASONS, the stock experienced a massive bump in 2021. The rapid inflation caused Robinhood (among a few other apps, but mostly Robinhood) to suspend the ability to buy shares, for reasons beyond proponents' ken [1]... which caused it to be interpreted as some financial conspiracy to keep the hedge funds alive at the expense of regular people. When the resulting short squeeze proved less calamitous than expected [2], the people who bought high have turned to increasing amounts of copium to motivate why the short squeeze hasn't happened yet, and turned to anything they can find that might enable them to trigger the "real" short squeeze (which at this point is no longer a mere short squeeze but a total financial apocalypse).
[1] The simplest explanation (though not entirely accurate, it is sufficient to get the reasons why across) is that Robinhood was borrowing money to buy the stocks on users' behalf, and the counterparties effectively did a margin call on Robinhood.
So just so you're aware... this is not a good source for financial understanding. This is the financial equivalent of someone who struggled with high school physics going to the Wikipedia article on quantum chromodynamics to then turn around and explain it to you.
Like, the explanation of derivatives is wrong. Leverage has nothing to do with derivatives; derivatives are essentially trades that are trading on the value of another asset rather than the asset itself.
The short answer as to what has happened is GameStop is a video game retailer that hasn't been managing the trend to digital distribution. For $REASONS, the stock experienced a massive bump in 2021. The rapid inflation caused Robinhood (among a few other apps, but mostly Robinhood) to suspend the ability to buy shares, for reasons beyond proponents' ken [1]... which caused it to be interpreted as some financial conspiracy to keep the hedge funds alive at the expense of regular people. When the resulting short squeeze proved less calamitous than expected [2], the people who bought high have turned to increasing amounts of copium to motivate why the short squeeze hasn't happened yet, and turned to anything they can find that might enable them to trigger the "real" short squeeze (which at this point is no longer a mere short squeeze but a total financial apocalypse).
[1] The simplest explanation (though not entirely accurate, it is sufficient to get the reasons why across) is that Robinhood was borrowing money to buy the stocks on users' behalf, and the counterparties effectively did a margin call on Robinhood.
[2] One hedge fund failed.