WRAPUP 1-Traders return to GameStop plays as brokerages ease restrictions

Reuters2021-01-29

* GameStop gains return, up 100% in initial trades

* Stocks at heart of hedge fund squeeze had fallen on Thursday

* Robinhood, other brokers to ease restrictions on Friday

By Sagarika Jaisinghani and Medha Singh

Jan 29 (Reuters) - Wall Street braced on Friday for the return of an army of amateur investors to trading in GameStop and other hot stocks whose surges this week and subsequent suspension have pitched the little guy against short-selling hedge funds.

Shares in GameStop , AMC Entertainment and BlackBerry plunged more than 40% on Thursday after several online platforms imposed buying halts, but rebounded in late trading as Robinhood and Interactive Brokers said they planned to ease the restrictions on Friday.

The showdown between individual investors and professional short-sellers has roiled global equity markets as funds were forced to sell some of their best-performing stocks, including Apple Inc , to cover billions of dollars of losses.

Wall Street futures and European stock markets fell 1% on Friday, while Asian equities headed for their steepest weekly loss in months as the GameStop effect added to growing doubts about the future of a decade-long rally.

Shares in GameStop surged as much as 100% before the formal open of premarket trading in New York.

"My expectation is that this will blow over and then the Robinhood crowd will look for a different target, but typically these things come in waves," said Andrea Cicione, head of strategy at TS Lombard in London.

Investors, celebrities and policymakers denounced Thursday's restrictions, with two customers suing Robinhood over the trading ban and Capital Hill committees signalling they would hold hearings on the affair.

On Reddit forum WallStreetBets, which with almost 6 million members is seen as having fuelled the rallies, GameStop and AMC remained overwhelmingly favored stocks.

J.P. Morgan has named 45 stocks that may be susceptible to "fragility events" in days to come, including real estate company Macerich Co , restaurant chain Cheesecake Factory Inc and clothing subscription service Stitch Fix Inc

.

Like GameStop, AMC and American Airlines Group Inc , all have high "short" interest ratios, making them subject to a squeeze on funds that have bet on the shares falling.

"Unfortunately, it's definitely not a one-off thing," said Randy Frederick, vice president of trading and derivatives at the Schwab Center for Financial Research.

"The type of activity that drove that (move) higher, I believe, has caused people to try to duplicate that in other names."

STEAL FROM THE RICH?

Online broker Robinhood has been one of the hottest venues in the retail-trading frenzy but its sudden curbs on buying set off a raft of online protests as the firm tapped credit lines to ensure it could continue trading.

A report in the New York Times overnight said the brokerage was raising an infusion of more than $1 billion from its existing investors, having been strained by the high volumes and volatility of trading this week.

Robinhood did not immediately respond to a request for comment, but said in a blog post earlier that volatility affected its obligations to hold capital and clearinghouse deposits, adding there was no liquidity crisis.

Regarded by market professionals as "dumb money", the pack of retail traders - some of them former bankers working for themselves - has become an increasingly powerful force of the financial world, sparking calls for greater scrutiny into trading on easy access online apps fueled by anonymous discussions on social media.

After Thursday's moves, those who are involved in the trades now face the dilemma of closing out positions in the red with losses, selling to cash in winnings or pushing on to force more short-sellers to capitulate.

"Now we're really figuring out what can happen when something doesn't go their way," said JJ Buckner, a 29-year old Robinhood trader whose YouTube live-stream got over 250,000 hits earlier this week.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ EXPLAINER-Why regulators may scrutinize GameStop's Reddit-driven retail stock surge TIMELINE-GameStop's 1,600% surge in retail investor vs hedge fund battle BREAKINGVIEWS-Short squeezers could end up strangling themselves

The big short: GameStop effect puts global bets worth billions at risk GameStop surge leaves U.S.-based mutual funds and ETFs behind

Europe's top shorted stocks soar on GameStop contagion

U.S. state regulator says GameStop trading could be 'systemically wrong' - Barron's Bearish GameStop options contracts fly off the shelf after stock surge Hedge fund Melvin Capital has closed GameStop position -spokesman BlackRock may have raked in $2.4 bln on GameStop's retail-driven stock frenzy QUOTES-No let up in short squeeze, retail frenzy forces funds to cover GRAPHIC: GameStock surge timeline GRAPHIC: The short squeeze EXPLAINER-How retail traders squeezed Wall Street for bets against GameStop Retail trading frenzy, reflation trade drive smallcap stocks higher GRAPHIC-U.S. most shorted index soars as wider market cools GRAPHIC-Hedge funds scrambling to exit shorts, cut losses GRAPHIC-GameStop 'long the shorts' trade goes mainstream

FACTBOX-A peek into stocks swept up in GameStop retail trading frenzy TAKE A LOOK-From Reddit rally to trade curbs: The retail trading frenzy

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(Reporting by Sagarika Jaisinghani and Medha Singh in Bengaluru; Additional reporting by Munsif Vengattil and Juby Babu in Bengaluru, Anna Irrera, Saqib Iqbal Ahmed and April Joyner in New York and Thyagaraju Adinarayan in London; Writing by Patrick Graham; Editing by Saumyadeb Chakrabarty)

((Sagarika.Jaisinghani@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 6182 2256;))

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Comments

  • koabi
    2021-01-29
    koabi
    DIAMONDS HANDS ??
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