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Costly short squeeze makes Reddit required reading on Wall Street

“I joined it to be able to read it,” he said. The app is popular with retail investors who “might be talking about a stock I own, and it could move. There could be a trading opportunity there as well,” said Dick, a proprietary trader at Bright Trading.

January 28, 2021 / 11:01 AM IST
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Dennis Dick, a professional stock trader in Las Vegas, reads the site Seeking Alpha before work and keeps up to the minute throughout the trading day by watching Twitter, but last weekend he also joined a group on the popular online discussion board Reddit “because I need to know what’s going on.”
“I joined it to be able to read it,” he said. The app is popular with retail investors who “might be talking about a stock I own, and it could move. There could be a trading opportunity there as well,” said Dick, a proprietary trader at Bright Trading.

Retail investors have long discussed stocks on Reddit and other social media forums, but in recent months Wall Street has had to pay attention to what they are saying. Long dismissed as “dumb money,” retail traders in recent months have put enough money into the market to make stocks move in ways that defy fundamental analysis.

The most stunning recent example is a nearly 700% rise over the past week in shares of GameStop Corp, without any fundamental change in business for the video game retailer that Wall Street had long given up for dead in the age of Amazon and online downloads. The sharp upswing in GameStop shares has mowed down sophisticated traders who had taken short positions on the stock, betting against it. The surge was fueled in large part by a series of posts talking up the stock on popular forums on Reddit.

Wall Street is paying attention.