Besides GameStop, other popular short-squeeze targets among Reddit traders were taking big hits on Tuesday.
Shares of AMC Entertainment, which rallied nearly 300% last week from a major short squeeze, was down about 39% in afternoon trading. The iShares Silver Trust ETF, part of an attempted squeeze on the metal, was down 7%.
Reddit trades start to unwind
In other heavily shorted names that rallied last week, BlackBerry fell 19%, Express slipped 34%, Koss fell 33%, Naked Brand lost 35% and Nokia dropped 7% in mid-morning trading. Genius Brands was down 3%.
Many of the names came off their lows of the session after Robinhood announced that it was easing trading restrictions.
Short selling is a strategy in which investors borrow shares of a stock at a certain price on expectations that the market value will fall below that level when it’s time to pay for the borrowed shares. It’s a strategy often used by hedge funds.
Amid last week’s retail investing frenzy in heavily shorted names, Reddit-fueled traders drove GameStop, AMC Entertainment, Koss and others’ stock up, squeezing hedge funds shorting the names. This week, those stocks are coming back down to Earth as Robinhood and other trading apps continue to limit buying of stocks and options contracts and as the squeeze trade lost momentum.
Square’s Cash App, which picked up some frustrated Robinhood clients last week, just announced it’s clearing broker, Axos, is halting buys of AMC Entertainment and Nokia.
Shares of GameStop were down more than 60% on Tuesday.
Currently, Robinhood allows clients to buy only 100 shares of GameStop and 1,250 shares of AMC Entertainment. However, if Robinhood clients own more than the share limit, they can’t purchase any shares.
Robinhood and other brokers are required to meet certain deposit requirements from trade clearinghouses. Because of the heavy trading volume, Robinhood said last week it had to impose the restrictions because deposit requirements set by its clearinghouse were much greater that expected.
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