![]() ![]() REDDIT VS WALL STREET: THE GAMESTOP EFFECT A ‘short squeeze’ happens when traders, who bet the price of an asset will fall, scramble after the stock jumps sharply higher, unexpectedly. ![]() The risk is that they are counting on being able to replace what they borrowed with something cheaper. It’s a strategy used by high-risk investment funds (hedge funds) to try to maximise profits.įor example (in a successful short selling scenario) investors borrow stock valued at $10 from someone, sell it on for that price, and return the stock to them after buying it back for $7, after the stock price falls, making a $3 profit themselves. Shorting stock or short selling stock essentially is borrowing stock (that you think is going to fall in value) from a broker and selling it at its current price, then buying it back (at the lower price) and returning the shares, but keeping the difference as profit. First up, a short explainer on shorting stock (shares in a corporation). ![]()
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