What Are Meme Stocks? We Explain Here

Meme stock craze, which began at the height of the coronavirus outbreak, has beaten institutional investors by organising retail day traders on social media to boost the price of businesses that Wall Street is betting against.

The stock price of struggling video game retailer GameStop was rocketed by this new breed of traders, who congregated on websites like Reddit’s well-known WallStreetBets forum and used commission-free trading applications like Robinhood.

By the end of January 2021, shares had risen from $3 in 2020 to over $300, triggering historic market volatility and significant losses for hedge funds that shorted stocks.

Borrowing a stock through a broker in the hopes that the price would fall is known as short selling. When it happens, the buyer returns it and makes money on the price differential between the first and second, lower prices.

It relies on the timing of what you bought and sold, just like with any investment. Individual investors made significant profits in GameStop, but those who currently own it would be making a loss.

Describe A Meme Stock

A stock that gains popularity among individual investors as a result of social media is known as a meme stock.

On a social media platform like WallStreetBets, a group of day traders choose a company and work together with members of their online community to buy shares to raise its price with the objective of selling it before it declines.

Typically, they go for businesses that Wall Street has gambled against. Typically, the success of the company has minimal bearing on the increase in stock price.