GameStop is not the only short squeeze game

In Opinion
February 2, 2021
Michael Cornips

You can look at stocks which have a short interest of over 20 percent here. https://www.highshortinterest.com/

Demonstrating that Gamestop and AMC Entertainment are not the only stocks witnessing dramatically higher share prices due to a short squeeze, the table below shows that all the most shorted stocks have seen dramatic increases in their share price since the end of last year.

The strategy of buying any share that has a high short interest, as the only reason to buy it, does not appear to be the soundest of long-term trading strategies. There seems to be a certain amount of schadenfreude in watching high flying hedge-funds burn billions at the hands of well organised amateur traders.

Steve Cohen’s $19 billion Point72 Asset Management has lost 10 – 15% this month. Dan Sundheim’s $20 Billion DI Capital has lost 20% and Melvin Capital had lost 30% through to last Friday. Melvin Capital needed to take $2.75 billion from Steve Cohen to keep his firm liquid.

Like William Wallace’s popular victory against English at the Battle of Stirling Bridge in 1297, you had to know the all-powerful entitled English were always going to get their revenge. The Hedge Funds are not in the business of repeating their mistakes and losing more billions. Like the English, they will swing their tactical superiority back in their favour. Bank of America Corp. increased margin requirements for certain stocks to 100%, normally 30%. In a statement released Monday, the CME said that silver margins would be lifted to $16,500 per contract from $14,000. Go figure. Watch for a pull back.