It does feel like a watershed moment regarding hedge funds. This is the first time netizens capitalize on hedge fund short favorites and it has been surprisingly easy to cause an absolute catastrophy in the order of billion losses for them. I heard Melvin Capital may even have gone bankrupt?
And how to do it? You get people to invest in a stock that is expected by the industry to go belly up. Seriously. It's that easy. It's not illegal. It's so easy that even semiprofessionals can understand exactly which stock are hedge fund favorites. It's not hard information to come by. And, here's the kicker: There is a potential monetary reward if you enter and exit a stock at the right moment.
So it's simple to discover and execute, and there is a financial incentive, and it's not against the law. This is a trifecta of properties that makes this very interesting to follow indeed.
And how to do it? You get people to invest in a stock that is expected by the industry to go belly up. Seriously. It's that easy. It's not illegal. It's so easy that even semiprofessionals can understand exactly which stock are hedge fund favorites. It's not hard information to come by. And, here's the kicker: There is a potential monetary reward if you enter and exit a stock at the right moment.
So it's simple to discover and execute, and there is a financial incentive, and it's not against the law. This is a trifecta of properties that makes this very interesting to follow indeed.
I just saw this article too: As hedge funds try to cover losses, the rings are now spreading over the market: https://www.bloomberg.com/news/articles/2021-01-26/hedge-fun...
The author speculates that this might even ultimately trigger a market correction.