Meme stocks soar in late day trading surge, short sellers knocked

KOSS

24/08/2021 21:50

By Saqib Iqbal Ahmed
    NEW YORK, Aug 24 (Reuters) - Shares of several retail
trading darlings, including AMC Entertainment  AMC.N  and
GameStop  GME.N , surged in heavy volume late on Tuesday, on no
apparent news, dealing over $1 billion in losses to short
sellers.
    While broad market indexes rose modestly on Tuesday, with
the Nasdaq  .IXIC  up 0.5% and the S&P 500  .SPX  0.1% higher,
several of the "meme stocks" notched big gains.
    GameStop shares jumped 27.53%, AMC shares climbed 20.3%,
Clover Health Investments  CLOV.O  rose 9.9%, Koss Corp  KOSS.O 
rose 4.4%, Robinhood Markets climbed  HOOD.O  9.0% and
ContextLogic  WISH.O  rose 6.4%.
    "When you get a move that big it almost makes you think
there is some big hedge fund or something out there that decided
to do some trades," said Randy Frederick, managing director of
trading and derivatives at Schwab Center for Financial Research.
    Frederick, however, said he had seen little in the way of
news to spur the large share price moves on Tuesday.
    The jump in the share price on Tuesday also dealt large
losses to investors with bearish bets on some of these stocks,
according to analytics company ORTEX.
    "Heavily shorted stocks have, for the last month, been less
volatile than earlier this year. Today we saw an end to this,"
said Ortex co-founder Peter Hillerberg.
    The share price gains in AMC and GameStop generated losses
for close to $1 billion for short sellers, Hillerberg said.
    Short sellers aim to profit by selling borrowed shares,
hoping to buy them back later at a lower price.
    Several of these stocks also drew higher-than-usual trading
volume in the options market on Tuesday, as traders jockeyed to
either take advantage of the rallying prices or moved to cover
positions that were under water. 
    For instance, GameStop options trading volume was at 407,000
contracts, or about six times its recent average daily trading
volume, according to data from options analytics firm Trade
Alert. AMC options volume came in at 1.6 million contracts,
nearly three times its daily average, making it the most active
single stock name in the options market on Tuesday, Trade Alert
data showed. 
    While the retail trading frenzy that had taken Wall Street
by storm earlier this year has subsided somewhat in recent
months, the periodic wild moves in the share prices has kept
investors on their toes, analysts said.
    "Options prices are implying that this is not going away any
time soon," said Brian Overby, senior options analyst at Ally
Invest.    

 (Reporting by Saqib Iqbal Ahmed; Editing by Lisa Shumaker)
 ((saqib.ahmed@thomsonreuters.com; @SaqibReports; +1 646 223
6054; Reuters Messaging:
saqib.ahmed.thomsonreuters.com@reuters.net))