A group called WallStreetBets with a following of over 3 million users drove up the price of several stocks including Gamestop, Blackberry, and Nokia. Mainly Gamestop received a jump in price so massive that hedge fund traders lost millions of dollars. Trading platforms, the SEC, and other government entities caught wind of this activity and the group was temporarily shut down
Gamestop was trading for less than $4.00 this time last year but at 9:30AM on Tuesday (01.27.2021) it went on a bullish trend past $75.00. Traders who banked on shorting and setting puts on this stock took on exponential losses as those a part of the pump reaped bountiful rewards.
This tactic of pumping-and-dumping as not a new practice in the world of trading. Countless wealthy investors are responsible for strange bullish trends and sell-offs for stocks in an act to line their own pockets at the cost of those who get lost in the wave of stock price manipulation. Countless machines running time series data analysis and statistic-based models rake in exponentially high amounts of capital for many corporate entities. Major pumping requires large capital to move stocks outside of low float stocks but with a group of over 3 million, enough capital is generated off of sheer numbers. The common person won a financial battle against the power of money and machines. The news all over the web and televisions has a field day with memes and reports about GME’s(Gamestop’s) strange market activity that left their failing business in the best position it has ever been in the trading world. Statistically speaking, this artificial pumping from the middle and lower class traders around the world may reoccur. Will this and other instances negatively affect the integrity of time series models any more than they are already skewed from rich traders’ market manipulation?
This was without a doubt a successful effort to stick it to the rich traders who manipulate the market on a regular basis unpunished at the cost of countless other traders. We will see more independent pumps of stocks. As more hype is generated around this, all we can do is either watch or join.