38. What is a Short Squeeze? (Talking About Meme Stocks, Hedge Funds & Market Mechanics)
Description
Finally, short squeeze and gamma squeeze make sense! (Did you know gamma squeeze was a thing?)
Also, Roaring Kitty is out of hiding, remember that whole GameStop stonks thing that happened? Well apparently it's happening again with another memestock (super high risk, y'all).
We also learn about hedge funds, meme stocks, market makers and the roles played in making money off shorting stocks (or squeezing out the shorters). Check out our episode on Dark Pools for more background. We also very briefly discuss Options!
Hedge funds are regulated and here's the link we mentioned for that: https://www.sec.gov/files/ib_hedgefunds.pdf
The Takeaway:
Shorting a stock is super risky. You're gambling on the failure of a company, essentially, and this tends to happen in hedge funds. A short squeeze is an event that happens when the people who are shorting stock shares have to cover the cost of the shorted stock because now the price is going up due to unforeseen demand (people suddenly buying it) and getting squeezed out of that position. It's like we always say, investing involves risk. ;)
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Market MakeHer is an investing education podcast taught by a 15-year finance expert to her friend who is a beginner investor. Our mission is to demystify the stock market and make financial literacy accessible to all self-directed investors! We believe that investing is for everyone and that's why we break down complex investing topics (from "Her" perspective), show you free tools/resources on our podcast, and offer a ton of free educational content on our website!
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