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GameStop shares: what you need to know


CharlotteIG

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The surge in GameStop has caught the market’s attention, and that of financial media. A small retail stock, in an industry in long-term decline, has seen its market value rise very rapidly, as retail traders, coordinating via the website Reddit, have bought into the stock using options, forcing the hedge funds that have taken short positions in it to close out their trades, pushing the stock yet higher.

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What is a short squeeze?

This short squeeze is a classic market move, familiar to many traders, and is something that can occur in almost any market, if the conditions are right. In this, the conditions were that short positions had been built up in a company that had seen its stock price fall nearly 95% from its 2013 high. This ‘one-way’ trade had continued regardless of the moves in broader indices, as investors took advantage of the fall in traditional retail volumes, leaving companies like GameStop with declining businesses.

All seemed to work well, until traders on the ‘Wall Street bets’ sub-Reddit decided to start buying the stock. When the stock rises, some shorts have to cover their position by closing out and buying back the stock. This in turn drives the price higher, forcing out others, and so on. A short squeeze develops, which can, as in this case, drive the price to dizzying highs that are arguably entirely unconnected with the actual business.

Some might suggest this is market manipulation, but the short positions in a company are public knowledge, and it is not actually illegal for ordinary investors to club together in the same stocks. Traders who short need to be aware that such squeezes can happen and should also realise that the vast majority of trades, particularly in equities, are on the long side. Most investors, whether retail or professional, buy stocks in the hope that they will go up.

Shorting is an important part of the market and helps the activity of ‘price discovery’ to develop. It also helps liquidity and should be viewed as an underhand activity. But while share prices can ‘only’ go to zero, giving long investors a theoretical floor, they can, in theory, go as high as they like. Thus, those with short positions, can, if they do not manage their risk properly, suffer unlimited losses.

Continued gains are not guaranteed

While GameStop, and others that have been heavily shorted, has enjoyed a huge rally, this does not mean that continued gains are guaranteed. The future of any trade is always uncertain, and after such a huge ride there may be many investors, of all types, who still think that the shares are overvalued, and will look to short them once again. Regardless of whether an investor trades long or short, they must make sure that they have a clear risk management plan in place, with stop levels clearly defined.

We are currently seeing increased volatility in certain stocks, including GameStop and AMC. This increases the risk of sudden, large or rapid loss and the potential for gaps, where stocks fall dramatically when the market opens.

Please note that IG does not offer options on GameStop or AMC Entertainment, or the ability to short these stocksIt must be stressed that IG does not offer options on GameStop, with only spread bet, CFD trades or share dealing available on our platform.

The activity in these stocks has been confined to a small part of the market, with normal price action continuing in the vast majority of stocks. It will command plenty of attention in the media, and the excitement will undoubtedly provide an attraction for many traders, but sometimes it is better to watch from afar rather than attempt to jump in to such a volatile situation.

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19 minutes ago, superwi11 said:

So what is IG going to do about the fact that it crashed for an hour during the rapid events, and GME shares worth $400 couldn't be sold (in fact, it seems a huge number couldn't even log in successfully) until they had hit $200.

Taking risks on a stock is one thing. But when the platform goes completely dark, is that just a gamble that's our fault as well? And if it's not our fault, then does the company who's responsible get to share in the losses they're responsible for?

Hey @superwi11

Thanks for your comment. 

We do apologise for the issue yesterday and if your positions were affected we do urge you to correct your exposure and reach out to us so we can resolve this for you. 

All the best 

  • Like 2
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Guest Flat

Posted

Can't believe I need to look around for an alternative broker. Don't want to be caught out by concentration risk. I logged in yesterday to get involved in this stock but the price was "suspended".

Come on IG, play fair. It's what the regulator would want......

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IG Nokia NOK the last straw.

Shocking, Ive had this happen countless times with IG every time there is an actual opportunity to trade volitility retail are blocked out until the position is crushed due to buying blocked out how convenient that seems.

  I am now even more fed up of being blocked from taking profits, can't close position due to either platform not functioning or "outages "  in which IG are still able to seek positions and deal themselves and blame other factors

Why is it every single time your position only comes live again is when its dropped way past your stop limit e.g £1100 stop loss then opens briefly to a -£1800 and closes you

Then if you want re buy at the lower point the margin moves from (Nokia) 28th jan 21) 11am £50pp £4500 margin needed to £50pp £21,000.00 equity needed in the same day . 
After being blocked to sell at a £2500 profit by the 'platform' and market "outage"
until my position is forced down by no one being able to buy the market im kicked out with a £1800 loss 

Then attempt to re buy on another Nokia instrument that is open (green light) with a £200 stop loss and immediately then goes dark and fires in a £875 loss 

In what way are IG acting in clients interest here, if your not able to offer instruments fit for purpose how can the FCA allow you to provide them 

Complaints team call me to apologise for the situation and their very poor email response that was shocking in all honesty,  this proceeds with a first seemingly helpful agent wishing to rectify the situation.
Firstly offering me to be put in a overall position of £380 .00 ish up on the 2 trades yesterday. but wait....

I explain I was un able to close the position continuously while it bounced £2300 to £2800 profit for a good while and while I appreciate his offer could he not try a bit better to put me right.

He then comes back on the phone to tell me its not IG's fault and their system was faultless ! this is not true and I logged earlier screen shots with positions marked at £1395 profit and £1780 profit which were also not able to be closed due to failings of IG

The best bit of all is now they won't offer any compensation at all now and blame the underlaying market conditions of why then can't provide exactly what they advertise to be able to do.

Im not letting it go this time around ive spent a small fortune on IG's services for years and this is how retail clients are treated. 

Ive not even been offered to be completely zeroed on yesterday's trading when I should of had a £2500 rare opportunity to make a profit.

  • Like 4
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10 hours ago, superwi11 said:

So what is IG going to do about the fact that it crashed for an hour during the rapid events, and GME shares worth $400 couldn't be sold (in fact, it seems a huge number couldn't even log in successfully) until they had hit $200.

Taking risks on a stock is one thing. But when the platform goes completely dark, is that just a gamble that's our fault as well? And if it's not our fault, then does the company who's responsible get to share in the losses they're responsible for?

also my problem not happy.

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9 hours ago, CharlotteIG said:

Thanks for your comment. 

We do apologise for the issue yesterday and if your positions were affected we do urge you to correct your exposure and reach out to us so we can resolve this for you. 

All the best 

how can i contact you regarding my issues please. so far nothing but a quick brush off.

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Okay, so if I were attempting to sell at $400, but was unable to due to IG's platform failing, then the price drops to $200, is that just a "whoops, sorry, better luck next time" from IG, or is there anything to be done about those lost gains?

  • Like 3
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Surely by stopping people go long you are making sure there is a guarentee that the price will go down? 

  • Like 2
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Guest randomretard

Posted

What a complete bunch of clowns.

We all know that it's rigged, we know your all commiting crimes.

Your job is to HIDE that information from us.

HIDE it.

Not like this.

This is SHOWING US.

Can you see the difference?

 

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Guest Gkd

Posted

Tried to sell my shares when it peaked at 450 but would not let me sell or log in. Then later on saying the stock is not allowed to be traded. Im at a loss now. Is this  deliberate manipulation legal? The FCA and watchdog  should find out about this.

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On 29/01/2021 at 12:22, superwi11 said:

So what is IG going to do about the fact that it crashed for an hour during the rapid events, and GME shares worth $400 couldn't be sold (in fact, it seems a huge number couldn't even log in successfully) until they had hit $200.

Taking risks on a stock is one thing. But when the platform goes completely dark, is that just a gamble that's our fault as well? And if it's not our fault, then does the company who's responsible get to share in the losses they're responsible for?

It didn’t crash.. they wilfully pulled the app and prevented access purposely. It should be invested by the FSA.. and preventing trading in these stocks is clearly market manipulation.. they are all pulling together to prevent the full squeeze bankrupting their hedge fund city chums! 

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