{"type":"rich","version":"1.0","provider_name":"Transistor","provider_url":"https://transistor.fm","author_name":"Curiosity Chronicle","title":"The Mechanics of a Meme Stock Rally","html":"","width":"100%","height":180,"duration":292,"description":"Welcome to all of the new subscribers who have joined this growing tribe since Monday. If you’re not a subscriber, join the 18,500+ others and subscribe today!The Mechanics of a Meme Stock Rally“Meme stocks” like AMC and GameStop have captured the attention of the financial world. But few understand what is actually driving these furious price rallies. Let’s dive into the mechanics of a meme stock rally…First off, what is a meme stock? There is no single definition, but meme stocks can be understood as stocks that experience rapid upward price movements as a result of collective social media evangelism. The price movements are typically not related to business fundamentals.AMC and GameStop are the two most salient examples of meme stocks from recent memory. Both experienced furious, Reddit-fueled rallies that left the financial establishment scratching their heads. Heroes emerged, like fearless leader Roaring Kitty (who is not, in fact, a cat!). But how did it happen? Emotion (FOMO!) and the power of crowds played a role, but I’ll leave those to the sociologists and psychologists to analyze. There are two underlying financial dynamics at play: a short squeeze and a gamma squeeze.Let’s cover the mechanics of each…The Short SqueezeFirst, a short squeeze. The \"short\" in \"short squeeze\" refers to the concept of short selling. The basics are covered in my thread below. TL;DR - short selling is a way of betting against a stock - i.e. betting that its price will decline. \"Short interest\" is a measure of how heavily an asset is shorted by the market. It is the total number of shares that have been sold short (borrowed and sold), but have not yet been covered (bought and returned). It is usually measured as a % of the # of shares outstanding.A \"short squeeze\" occurs when a heavily-shorted asset experiences a rapid upward price movement. When this happens, short sellers may be forced to close their short positions (i.e. buy the stock and return it to the broker), further...","thumbnail_url":"https://img.transistorcdn.com/4nO1oo__jWE5MpZsRfwEO_6q4py16kwv8WwJybce4FA/rs:fill:0:0:1/w:400/h:400/q:60/mb:500000/aHR0cHM6Ly9pbWct/dXBsb2FkLXByb2R1/Y3Rpb24udHJhbnNp/c3Rvci5mbS9zaG93/LzMxOTcwLzE2NzEx/MzU5MDctYXJ0d29y/ay5qcGc.webp","thumbnail_width":300,"thumbnail_height":300}