Besides GameStop, other popular short-squeeze targets among Reddit traders were taking big hits on Tuesday.
Shares of AMC Entertainment, which rallied nearly 300% last week from a major short squeeze, was down about 50% in morning trading. The iShares Silver Trust ETF, part of an attempted squeeze on the metal, was down 6%.
Reddit trades start to unwind
In other heavily shorted names that rallied last week, BlackBerry fell 10%, Express slipped 31%, Koss fell 41%, Naked Brand lost 27% and Nokia dropped 5% shortly after the opening bell. Genius Brands was down 3%.
Short selling is a strategy in which investors borrow shares of a stock at a certain price on expectations that the market value will fall below that level when it’s time to pay for the borrowed shares. It’s a strategy often used by hedge funds.
Amid last week’s retail investing frenzy in heavily shorted names, Reddit-fueled traders drove GameStop, AMC Entertainment, Koss and others’ stock up, squeezing hedge funds shorting the names. This week, those stocks are coming back down to Earth as Robinhood and other trading apps continue to limit buying of stocks and options contracts and as the squeeze trade lost momentum.
Square’s Cash App, which picked up some frustrated Robinhood clients last week, just announced it’s clearing broker, Axos, is halting buys of AMC Entertainment and Nokia.
Shares of GameStop were down more than 60% on Tuesday.
Currently, Robinhood allows clients to buy only 20 shares of GameStop and 350 shares of AMC Entertainment. Clients can by 700 shares of Blackberry and 1,000 shares of Koss. However, if Robinhood clients own more than the share limit, they can’t purchase any shares.
Robinhood and other brokers are required to meet certain deposit requirements from trade clearinghouses. Because of the heavy trading volume, Robinhood said last week it had to impose the restrictions because deposit requirements set by its clearinghouse were much greater that expected.
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