On January 27, 2021 in Chicago, Illinois, a sign hangs in front of an AMC theater. Shares of AMC Entertainment have more than quadrupled today as investors continue their buying habits on strong short-short stocks.
Scott Olson | Getty Images
In addition to GameStop, other popular short-squeeze targets among Reddit merchants became big hits on Tuesday.
Shares of AMC Entertainment, which rose nearly 300% after a major short squeeze last week, fell about 50% during morning trading. The iShares Silver Trust ETF, part of an attempt at pressure on the metal, was down 6%.
In other sharply shortened names that rebounded last week, BlackBerry fell 10%, Express fell 31%, Koss fell 41%, Naked Brand fell 27%, and Nokia fell 5% shortly after the opening bell. Genius Brands was down 3%.
Short selling is a strategy where investors borrow shares of a stock at a specified price in the expectation that its market value will fall below that level when it comes time to pay for the borrowed shares. It is a strategy often used by hedge funds.
Amid last week’s frenzy of retail investing in heavily shorted names, Reddit-fueled traders bulldozed GameStop, AMC Entertainment, Koss, and others, forcing hedge funds to go short on the names. This week, those stocks are coming back to Earth as Robinhood and other trading apps continue to restrict stock buying and option contracts and as squeeze trading lost momentum.
Square’s Cash App, which picked up some frustrated Robinhood customers last week, just announced that clearing broker, Axos, is discontinuing AMC Entertainment and Nokia purchases.
Shares of GameStop are down more than 60% on Tuesday.
Currently, Robinhood allows customers to purchase only 20 shares of GameStop and 350 shares of AMC Entertainment. Customers can go through 700 shares of Blackberry and 1,000 shares of Koss. However, if Robinhood clients own more than the stock limit, they won’t be able to buy stock.
Robinhood and other brokers must meet certain deposit requirements set by trade clearing houses. Last week, due to the large volume of trade, Robinhood said it had to impose the restrictions because the clearinghouse’s deposit requirements were much higher than expected.
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