LANSING, Mich. (WLNS) – By now you’ve probably heard about the controversy surrounding Gamestop and other stocks and their effects on the stock market, but you may not totally understand what’s going on.
Local money expert Stephen Schiestel breaks down what’s going on.
Stocks like Gamestop, AMC, Blackberry, Bed Bath and Beyond and others have generally been ignored as they were struggling stocks.
These stocks caught the attention of short-term traders online, specifically the Reddit board /r/wallstreetbets. The value of these stocks has skyrocketed since they caught the internet’s attention.
“Most people buy stocks in the sense that they’re going to go long, which means I buy a stock and I hope it appreciates over time,” said Schiestel.
“There are some investors that will short a stock, so instead of [holding long] they are going out, borrowing the shares from someone else, and then selling them with the hope that the price will drop and they can buy back at a lower price.”
Essentially, most investors hold a stock and want the price to go up. Short sellers sell quickly and want the price to drop, or “shorting” the stock.
While anyone can technically short a stock, it’s usually professional investors that do so, such as hedge funds.
But now, part-time investors on sites like Reddit are rallying around stocks and saying “we’re gonna buy this stock.” This is causing conflicting parties.
Short sellers want the price to drop, the Redditors want the price to rise.
All this buying activity is causing the price to rise, forcing short sellers to cut their losses, which allows other investors to turn around and buy their stocks. Further amplifying the buying activity.
Schiestel advises the “average investor” to just watch and not jeopardize their long term portfolios.
If you want to get involved, maybe put a small “gambling” portfolio off to the side, he said.
How did this all start, though?
Gamestop has been in hot water for a while.
/r/wallstreebet’s fascination with Gamestop started in 2020 when they noticed that a share of Gamestop costs around $4.
At time of writing, a Gamestop share is around $220. Thats a 5400% increase.
Even with all this explained, the language used by internet traders is still confusing to most.
The community surrounding /r/wallstreetbets have their own wordage that’s made its way into the general trading vocabulary, many of these slang terms being emojis or coming from emojis.
Wonder what they mean? Here’s a breakdown of some popular /r/wallstreet bets and online trading lingo.
- Ape emoji 🦍: References the film War for the Planet of the Apes, where a character says the phrase “apes together strong.” This symbolizes unity amongst traders.
- Diamond hands 💎✋ : Means to hold the stocks, don’t sell.
- Rocket ship emoji:🚀: References the stock price rising “to the moon.”
- Snake emoji 🐍: Refers to hedge funds that the subreddit dislikes, such as Melvin Capital.
- Stonks: An intentional misspelling of the word stocks, referencing the Stonks meme.
- HODL: An intentional misspelling of “hold,” encouraging traders to hold the stock.
- Tendies: Profits made off trading.
- Hold the bag/bagholder: Someone who took a loss on a stock.
What does cryptocurrency have to do with this?
With America’s eyes on the financial world, many cryptocurrency traders are taking this opportunity to plug their favorite cryptocurrency, such as Bitcoin or Ethereum.
Fans of the cryptocurrency DogeCoin, named after the Shiba Inu “Doge” meme, took the opportunity to espouse their love of the currency.
DogeCoin became the most mentioned cryptocurrency on Twitter, and has jumped from less than one cent per DogeCoin, to around three cents per DogeCoin. That might sound like a small amount, but it’s over a 300% increase.