The GameStop Short Squeeze: Swarm of Small Investors Stings Wall Street Hedge Funds

If you think the price of a stock is going to go up, you can buy shares and wait for the price to go up, then sell the shares to someone else. This is called being “long” a stock. If it turns out that the stock price goes down and stays down, the most money you can lose is the amount you put in, since the stock price cannot go below zero.

But what if you think the stock price is going to go down instead of up? You may believe the price has run up irrationally high, or your analysis uncovers poor earnings prospects. A favorite tactic of Wall Street pros, including hedge funds, in this case is to “short” a stock.

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