As a 90’s kid, I still remember going to a shop with my parents and buying the latest version of sports, action, or strategy videogame. It was a pure moment of joy and excitement!
Since then, the online space has taken over the gaming industry. The number of people going to a store to get a “CD game” has dramatically decreased since the creation and development of the internet as we know it today.
Still, in January 2021, it seems that the world went on a U-turn. Gamestop, the videogame retailer, rose over 1,500% in a few days.
Why did GameStop shares rise so much? Did people start buying physically again? How to buy GameStop shares? Let’s dive into it!
Why was GME stock going crazy?
It all started in Reddit, a social news website and forum where people can discuss whatever they feel appropriate within different communities. More precisely, Gamestop was resurrected on the sub-Reddit Wallstreetbets.
Some users noticed that Gamestop had a short interest of around 140%, meaning that stocks had been sold short, re-lent and shorted again. Short interest is the percentage of shares that have been sold short (sold by people that had to borrow those shares) but have not yet been covered or closed out.
This is the perfect environment for what is called a short squeeze, a phenomenon where short-sellers are forced to repurchase stock as prices rise, thereby pushing the price higher.
Imagine the following: you ask your broker borrowed shares to sell in the market and wait for it to go down, repurchase and give back the shares to the original loan. This strategy gives you a limited upside (the company going broke and you repurchase the stock at $0) and an unlimited downside (the stock can get higher indefinitely). With a short interest of 140%, a little buy pressure is enough to make everyone rebuy their shares to minimise their losses, but when everyone does it… Yeah, a spike occurs!
Another exciting part was that those short-sellers were mainly hedge funds, so it was pretty amusing to see the “little guy” dominating the “big boys” in their own game.
Steps to buy shares in GameStop
- Find a good online broker. Some factors you should consider when choosing an online broker are the range of products it allows you to trade, the fees charged, if it is regulated by top-tier institutions, among others.
- Open your brokerage account.
- Complete your registration.
- Fund your account. Some brokers require a minimum deposit.
- Place your trade. Use the broker search bar to find GME stock, choose the number of shares you wish to buy, the order type (market or limit order), and place the “trade” button.
In which brokers can I buy GameStop stock?
The number of online brokers offering GameStop stock is vast, so you will have no issues on that front. The process to find GameStop is straightforward! Just go to the search bar of each platform below and type “GME” (it will automatically appear).
Commission-free stock and ETF trading. You can also copy other traders/investors. Slick, modern, and easy for anyone to use. It is trusted by more than 25 million clients worldwide.
Disclaimer: 67% of retail CFD accounts lose money.
A low-cost broker from Europe that offers commission-free stock and ETF trading and lets you trade in a wide variety of investment products – stocks, options, warrants, futures, bonds and leveraged products.
Disclaimer: Investing involves risk of loss.
Dedicated to more experienced investors, Interactive Brokers offers a wide range of products from many exchanges worldwide.
An online broker that offers stocks, ETFs, bonds, futures, and options on major American, Asian and European exchanges and provides IPO access for individual investors (previously accessible only for institutional investors).
Disclaimer: Capital is at risk.
What to consider before investing in GME stock
Without a doubt, the GameStop frenzy has diminished since January 2021. However, the implied volatility is still over 100%, which is pretty high and gives opportunities to participate in GameStop stock price swings.
We haven’t seen a comeback to the levels before January 2021, which indicates that the interest is still there, but please keep in mind that the momentum on the stock may vanish at any moment.
Finally, the company’s fundamentals may diverge from what the stock markets indicate. The likelihood of irrational behaviour in GME trading activity is not to belittle. It’s a question of belief in what the videogame retailer could become versus what it currently is.