Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading
Shares of AMC Entertainment Holdings Inc (NYSE: AMC) spiked 37.47% higher as Reddit traders drove the company’s share price extending its recent rally in an apparent short squeeze.
Earlier this week, retail investors on Reddit discovered that the professional traders at hedge funds and other financial institutions were back to shorting AMC stock. They jumped on the stock to drive it higher.
This is not the first time retail investors have forced institutional traders to take massive losses on their short positions by pushing AMC shares higher. The same scenario played out with hedge funds that had shorted AMC stock, booking massive losses.
According to S3 Partners, a company that tracks short-selling activity, AMC short-sellers had incurred losses worth $1.37 billion, with Wednesday’s price spike costing them $290.7 million.
AMC’s recent short squeeze was mirrored by Gamestop, whose short-sellers have lost over $6.7 billion since January.
It seems like the professional traders have not learnt a thing from the January short squeezes that caught them unawares. They continue to underestimate the power that retail traders wield in today’s decentralised markets.
In the past, institutions had a near-monopoly on stock market data giving them a significant edge over retail investors. They used to make outsized gains at the retail investors’ expense.
However, the current market landscape has given retail traders access to the same data used by the institutions equalising the scales. For the first time in modern history, retail investors discovered that they could come together and give the institutions a run for their money.
The latest short squeezes should send a strong message to the institutions, “Ignore the Reddit traders at your peril!”
I expect more short squeezes as the retail traders hunt for highly shorted stocks and buy them driving prices higher to book massive profits at the professionals’ expense. The short-sellers have to pay high borrowing fees or buy back the borrowed shares at higher prices.
AMC Entertainment share price.
AMC Entertainment shares surged 37.47% to trade at $36.47, rising from Thursday’s closing price of $26.5.
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