Ep 38: What is a Short Squeeze? (Talking About Meme Stocks, Hedge Funds & Market Mechanics)

Finally, short squeeze and gamma squeeze make sense! (Did you know gamma squeeze was a thing?)

Also, Roaring Kitty is out of hiding, remember that whole GameStop stonks thing that happened? Well apparently it's happening again with another memestock (super high risk, y'all).

We also learn about hedge funds, meme stocks, market makers and the roles played in making money off shorting stocks (or squeezing out the shorters). Check out our ⁠episode on Dark Pools⁠ for more background. We also very briefly discuss Options!

Hedge funds are regulated and here's the link we mentioned for that: ⁠https://www.sec.gov/files/ib_hedgefunds.pdf⁠

The Takeaway:

Shorting a stock is super risky. You're gambling on the failure of a company, essentially, and this tends to happen in hedge funds. A short squeeze is an event that happens when the people who are shorting stock shares have to cover the cost of the shorted stock because now the price is going up due to unforeseen demand (people suddenly buying it) and getting squeezed out of that position. It's like we always say, investing involves risk. ;)

Episode Equity

Jessie's Questions

Episode Transcript