Home / World News / RecreationStop Stock Soars as Reddit Investors Take On Wall St.

RecreationStop Stock Soars as Reddit Investors Take On Wall St.

Retail traders aren’t just buying and selling stocks; they are also buying options, a kind of financial instrument that gives the holder the right to buy or sell a stock. Brokerage firms have marketed options heavily to retail investors because they are more profitable.

And then there is Wall Street Bets, the wildly popular Reddit forum focused on options trading that has become a sort of public hive mind where retail investors loosely coordinate their collective buying power on targets that are most likely to amplify price pops. In recent weeks, posts began to appear on the forum spotlighting the large amount of GameStop shares held short, and explicitly urging others to buy shares and options to move the price higher.

“Rally the troops, my brothers, for the war could be over very soon,” a commenter who goes by Gardeeon wrote on Jan. 19. “You control the power, GME is not going to the moon, but to the edge of the [expletive] observable universe.”

Such outright calls on social media for investors to coordinate their behavior struck many observers as skirting the line of market manipulation. On Wednesday, the S.E.C. said in a statement it was “actively monitoring the ongoing market volatility.”

Lawyers say platforms like Wall Street Bets are incredibly difficult to police, and it is not clear that there have been any violations of securities law.

“If it’s simply garnering enthusiasm for people to go out and push the price up, I mean on its face, without something more, I don’t think that’s illegal,” said Andrew Calamari, a securities lawyer at Finn, Dixon & Herling, and the former director of the New York office of the S.E.C.

It is, however, effective.

Melvin Capital, a well-respected hedge fund run by Gabe Plotkin, a former top trader for the hedge fund giant Steven A. Cohen, drew the ire of Wall Street Bets after disclosing in filings that it owned puts on GameStop. (Puts are options that produce a profit if the shares of the stock fall.)

About brandsauthority

Check Also

Test bowling trio in NSW squad for final

NSW have included Test bowlers Josh Hazlewood, Mitchell Starc and Nathan Lyon in an enlarged …

%d bloggers like this: