Ever since bands of smaller-pocketed and novice investors began taking stock prices of downtrodden companies to breathtaking heights three years ago, the potential for more flareups has been obvious.
But some things remain firmly the same. Chief among them is the risk of losing everything that accompanies the potential to make fast money playing such volatile stocks. Here’s a look at what’s going on:GameStop, the granddaddy of meme stocks, has soared suddenly and sharply. It was nearly 37% higher Tuesday afternoon after surging 74% the day before. Other meme stocks from the pandemic era are moving just as radically. AMC Entertainment, the movie theater operator, jumped nearly 31% Tuesday.
A short squeeze is a relatively rare event that can yield eye-popping profits for people riding the wave. When investors bet a stock's price will go down in the future, they “short” it by borrowing shares and selling them. Later, if the price does indeed fall, the short sellers can buy the stock, return the borrowed shares and pocket the difference.