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Author: Alan LittleDate: 2021-05-27

GameStop Corp (GME) surges to $217 after failed gamma squeeze

GameStop Corp (GME) launches new Ethereum-based NFT platform and delights Redditors by ending trading on Wednesday at $217, following Tuesday’s 16.43% increase.

GameStop Corp (GME) enjoyed a powerful resurgence earlier this week, settling at $217 on Wednesday. It looks like GameStop could increase further this week after a failed gamma squeeze. The success of Wednesday’s trading suggests that GameStop could surpass $217 this week, which comes after the 16.43% increase, which was seen on Tuesday.

Why is GameStop resurging?

One reason is likely the fact that it announced its new platform for non-fungible tokens (NFTs), which will be powered by Ethereum – the second largest cryptocurrency after bitcoin.

Another reason for GameStop’s renewed success is the machinations of Redditors. Although the gamma squeeze event that was planned for Friday was likely mitigated by hedge funds, the conflict between Redditors and hedge funds continues to be waged. A ‘gamma squeeze’ is a trading term that refers to call buying on a mass scale that leads to higher stock prices. This in turn leads to more call buying and a higher stock price, creating a cycle. Calls are a type of option that increases in value in tandem with the price of the underlying stock.

The squeeze event was initially related to AMC Entertainment Holdings (AMC) and was identified through the social media hashtag #AMCSqueeze. However, it appears that AMC was used as a clever ploy by Redditors and acted as a decoy while they enacted their plan for Friday’s surprise GameStop gamma squeeze. AMC was left as unfortunate collateral in the action – the stock plummeted on Friday after the AMC squeeze did not occur.

The conflict between Redditors and hedge funds has already this week cost over $1bn to short-sellers of both GameStop and AMC. What will happen next is anyone’s guess, but the traders on Reddit remain optimistic.

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