Stock exchange, trading.Male trader sits in home office in front of screens with graphs and. Photo Credit: Envato @thelivephotos
The GameStop frenzy was primarily driven by a short squeeze, a situation where a stock's price rises sharply due to short sellers buying back the stock to cover their positions. This section will delve into the mechanics of short squeezes and how they can impact the stock market.
A short squeeze occurs when a stock's price rises sharply, forcing short sellers to buy back the stock to cover their positions. This can result in a feedback loop, with the increased buying pressure driving the stock's price even higher. The GameStop saga was a prime example of a short squeeze, with the stock's price skyrocketing as short sellers scrambled to cover their positions.
