There are dozens of ways to pick stocks, but few have been as unconventional -- or as successful -- as the coordinated short-squeeze being deployed by Reddit’s army of day traders. Now, Wall Street is scanning the matter.
About:
Short squeeze is a term used by market participants to refer to a phenomenon where short sellers in a stock who have placed their bets on a stock’s fall, rush to hedge their positions or buy the stock in the event of an adverse price movement, in order to cover their losses.
This leads to a sharp rise in demand for the share, and huge rally in share prices.
In order to cover his loss, the trader who was initially short on the stock, starts buying the stock, which leads to a sharp rise in the share price of the stock.
This phenomenon, where the short seller is buying the stock to cover her loss, is referred to as short squeeze in market parlance.
It leads to a dramatic rise in share price, far beyond its fundamentals.
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