Meme shares soar late in the day, short sellers hit

NEW YORK, Aug.24 (Reuters) – Shares of several retail darlings, including AMC Entertainment (AMC.N) and GameStop (GME.N), surged on Tuesday night, with no apparent news, dealing with more than a billion of dollars in losses for short sellers.

As the major stock indexes edged up on Tuesday, with the Nasdaq (.IXIC) up 0.5% and the S&P 500 (.SPX) up 0.1%, several of the “memes stocks” posted gains. big gains.

GameStop shares jumped 27.53%, AMC shares 20.3%, Clover Health Investments (CLOV.O) 9.9%, Koss Corp (KOSS.O) 4.4%, Robinhood Markets a climbed (HOOD.O) by 9.0% and ContextLogic (WISH. O) increased by 6.4%.

“When you get such a big move, it almost makes you think there is a big hedge fund or something that has decided to trade,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research.

Frederick, however, said he saw little news to stimulate large moves in stock prices on Tuesday.

According to analysis firm ORTEX, the rise in the stock price on Tuesday also caused significant losses for investors with bearish bets on some of these stocks.

“Heavily short stocks have, over the past month, been less volatile than at the start of the year. Today we saw the end of that,” said Ortex co-founder Peter Hillerberg.

AMC and GameStop’s stock price gains generated losses of nearly $ 1 billion for short sellers, Hillerberg said.

Short sellers aim to profit by selling borrowed stocks, hoping to buy them back later at a lower price.

Several of those stocks also attracted higher-than-usual trading volume in the options market on Tuesday, as traders scrambled to either profit from rising prices or hedge positions underwater.

For example, GameStop options trading volume was 407,000 contracts, about six times its recent average daily trading volume, according to data from options analysis firm Trade Alert. AMC’s options volume rose to 1.6 million contracts, nearly three times its daily average, making it the most active stock name in the options market on Tuesday, according to the data from Trade Alert.

As the retail frenzy that took Wall Street by storm earlier this year has subsided somewhat in recent months, periodic wild moves in stock prices have kept investors on their toes, said analysts.

“Option prices mean it’s not going to go away any time soon,” said Brian Overby, senior options analyst at Ally Invest.

Reporting by Saqib Iqbal Ahmed; Editing by Lisa Shumaker

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