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GameStop Stock Explodes Higher in After-Hours Trading

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Written by Timothy Sykes
Updated 4/18/2022 3 min read
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One of the most legendary short squeezes of all time is still underway as short sellers can’t seem to find the top.

Traders of GameStop Corp. (NYSE: GME) stock have been locked in an epic battle for months. The leading players are the short seller firm Citron Research and the retail traders on the Reddit thread r/wallstreetbets.

On Friday, the Reddit group seemed to win the battle, but the war was only just beginning.

With only 70 million shares outstanding and a stock price of $20 per share, GameStop had a market cap of $1.4 billion on January 12. After a surge of retail buying, the stock price doubled to $40 by January 21.

Citron Research is a notorious short seller and research firm responsible for bringing Nikola Corporation (NASDAQ: NKLA) to its knees in 2020. It has maintained that GME stock will drop below $20 again.

But on Friday, January 22, a major short squeeze happened. Despite GME only having 70 million total shares, over 200 million traded hands. The share price spiked from $40 to $77 and closed the day near $65.

Monday marked another massive squeeze; the stock price continued to climb as high as $160 per share.

Tuesday’s session was so volatile that trading on GME was halted five times.

The breaking news desk for the all-in-one trading platform StockToTrade sent out the following alert at 3:46, just 14 minutes before the close:

More Breaking News

  • GME wow all the way down to 131 and then back to 145, I will say watch this after-hours … this has the potential to squeeze higher without getting halted!! GME will probably explode higher after the bell, especially if we break thru $150.

The stock closed near $150.

Then just after the market closed, Tesla, Inc. (NASDAQ: TSLA) CEO Elon Musk tweeted one word, “Gamestonk!!”

The price soared even higher, topping out near $250 in after-hours trading. A 1,150% increase in two weeks.

At the close of trading today, GameStop had a market cap valuation of $10.5 billion. rapid-results coronavirus test on March 17. On March 18, it opened at around . It went up to the s in After-hours trading added in another $7 billion to that total.

This is an excellent lesson in how a short position can add up to infinite losses. GameStop was worth $1.3 billion at the end of 2020. Short sellers have lost over $5 billion so far in 2021.

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”