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ASX 200 | A B C D E F G H I J L M N O P Q R S T U V W X

Bernd Struben | 25th February 2021 1:24 p.m. | More on: GME

Yes, I’m talking about the Reddit Army, the US-based group of retail investors connected through Reddit’s WallStreetBets and other social media

You probably remember the wild ride this collective went on last month in GameStop Corp (NYSE: GME) stock price and the plunge that followed

GameStop shares rose 104% yesterday (Aussie time overnight) The shares opened at a price of $ 4497 ​​and closed the day at $ 91 71

In after-market trading, GameStop’s share price is currently at USD 16910 In other words, 85% above the value that closed a few hours ago. However, this is still well below the high of Jan. January, when the Trade Army’s trading army recorded a share price of $ 34751

The déjà vu price action could be yet another attempt to put a quick squeeze on, and it will likely put short selling again – which you hope will benefit if a company’s stock price falls – on investors’ radars >

With that in mind, we turn to Adam Smith, CEO of Saxo Capital Markets Australia for an insight

Nobody disagrees with the practice of short selling per se, as traders and investors are given a mechanism to trade their views if, for example, they discover that a publicly traded company is overvalued relative to fundamentals or before a results announcement is made seeks a pullback, they can take a short position in the stock. This is all fair and legal

A naked short sale of stocks isn’t the only way to have your opinion, however – you might as well buy put options on the stock with the same result, but we don’t see anyone crying badly about people buying puts – suggesting that the real problem lies elsewhere

If you are unfamiliar, put options give the buyer the right, but not an obligation, to sell a certain number of shares at a set price by a certain date. When a company’s stock price falls, the put is In the money option and the investor pays the profits minus the put purchase fees. Of course, if the stock price rises, the put options are worthless and the investor has not reached the price of the put options

As Smith points out, there has never been a widespread backlash against put options so why so fear short selling? Smith says:

The problem is an alleged lack of regulation regarding the methods used by some short sellers, such as: B. to issue harmful reports, which may or may not be factually accurate, and then take advantage of the resulting movement in stock prices

What is needed now is clarity as to whether the spread of misinformation is a form of market manipulation that needs to be monitored in the same way as other market errors

If investment expert Scott Phillips has a stock tip, it may be worth listening to. After all, the Motley Fool Share Advisor’s flagship newsletter, which it has operated for more than eight years, has offered thousands of paying members stock choices that have doubled, tripled or even more has *

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Motley Fool employee Bernd Struben has no position in any of the stocks mentioned The Motley Fool Australia has no position in any of the stocks mentioned The Motley Fool has a disclosure policy This article provides general investment advice only (under AFSL 400691) Authorized by Bruce Jackson

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World news – AU – The Reddit Army is planning another short squeeze for GameStop (NYSE: GME )?