A brief history of short squeezes before GameStop8 min read . Updated: 29 Jan 2021, 04:34 PM IST
- r/wallstreetbets might be the star of the moment, but they walk in the footsteps of legends. Here are some fascinating short squeezes featuring Piggly Wiggly, VW, Tesla and RIL
MUMBAI: Given the current trend of reversion to the meme, the task of explaining a short squeeze is best left to redditors. An r/wallstreetbets user, Scheebs_, whose account now stands suspended, had put this explainer for dummies a few days ago. “Let's say 5 bananas currently cost $10. One ape on the market has 5 bananas; a snake asks to borrow 5 bananas for a bit and instead sells the 5 bananas thinking the price will go down soon (shorting or short selling). He thinks he can buy them later for less and give them back to the ape, and make a profit on the difference. The group of apes notice what the stupid snakes are doing and decide to buy all the bananas on the market, until snakes have no other choice than to buy from the group of apes in order to return what they borrowed (short squeeze)." Evidently, the apes represent the redditors looking to corner shares of firms shorted by hedge funds, who are referred to as snakes in the above story.
Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!Let’s get started