WallStreetBets Reddit Group: What Is It? (2024)

A decentralized Reddit forum called WallStreetBets is causing chaos on Wall Street.

The group "r/Wallstreetbets" (aka WSB) is a longstanding subreddit channel where over 3.5 million Reddit users discuss highly speculative trading ideas and strategies. Described as “like 4chan found a Bloomberg Terminal,” the community has caused huge disruption to financial markets this week.

Read More: GameStop Enters the Metaverse With ‘Web3 Gaming’ Job Post

On Sept. 19, 2020, a Redditor with the handle Player896 published a post in the channel entitled “Bankrupting Institutional Investors For Dummies, ft GameStop.” In it, the person outlined a strong bullish case for GameStop (GME), a brick-and-mortar business that primarily sells video games and consoles. Since November 2015 the company’s stocks had been steadily declining due to a shift from physical media to digital, and the arrival of the COVID-19 pandemic.

WallStreetBets’ GameStop opportunity

The author noted that GameStop stock was being heavily sold short at the time by a number of institutional investors, despite the fact “their books are rock-solid” and Chewy CEO and co-founder Ryan Cohen had spent almost $76 million for a 12.9% stake in the company. Cohen – the largest individual shareholder of Apple Inc. – later joined the GameStop board along with two former associates from his pet health products company on Jan. 11, causing the stock price to soar 50%.

Even after Cohen joined the board and the stock price began to rebound, a handful of hedge funds and other institutional investors continued to short-sell GME stock. This was likely an attempt by large players to out-muscle amateur traders and induce panic selling. The WallStreetBets Reddit community saw this as an opportunity to push back against the financial elite and decided to whip up a buying frenzy in the hopes of creating a major short squeeze. A short squeeze might sound complicated but it’s actually a relatively straightforward process. When institutional investors short-sell a stock, what they actually do is borrow a number of shares they believe will drop in value, sell them at the highest price possible and try to buy them back later at a lower price. If they’re successful, they hand the initial borrowed amount back and pocket the difference.

If the market turns against them, however, and the price of the shares increase, the trader is forced to buy the shares back at a loss. If the price rises dramatically within a short space of time it can cause devastating losses for the short-seller. In addition, because short-sellers are forced to buy back into the asset when a short squeeze happens, it helps drive prices even higher.

WallStreetBets crushes hedge funds, crashes trading apps

Melvin Capital, a U.S.-based hedge fund, and Citron Research were among the short-sellers impacted by the WallStreetBets army short squeeze. Two major hedge funds, Citadel and Point27 Asset Management, have since stepped in to save Melvin Capital with a $2.75 billion bailout.

In nine days, GME stocks skyrocketed over 1,800% from $19.79 to a high of $380. Cohen’s 13% stake in the company is now worth $2.5 billion.

The world’s richest man, Elon Musk, added even more fuel to the WSB inferno by tweeting his support with the word “Gamestonk!” – a deliberately misspelled version of “stock” popularized by an internet meme.

The WallStreetBets traders didn’t stop there. BlackBerry, AMC, Nokia, and Bed Bath & Beyond have become the next set of heavily shorted stocks to enjoy the WSB treatment, posting 24%, 310%, 70%, and 46% gains on Wednesday, respectively.

Mobile-friendly trading apps such as Robinhood and Trading212 both suffered outages during the opening of the American markets Wednesday morning as retail traders flooded in to join the frenzy.

In response to this extraordinary event, Adena Friedman, the CEO of Nasdaq – the second-largest stock exchange in the world – said the platform has begun monitoring social media and will halt trading if another WallStreetBets-driven pump is flagged. TD Ameritrade has also limited GameStop trading on its platform.

The WallStreetBets Reddit channel briefly went private on Wednesday in response to millions of new users pouring in. Discord also reportedly banned the WallStreetBets server due to a flurry of discriminatory posts and hateful comments. In a post, the moderators of WSB commented, “We have grown to the kind of size we only dreamed of in the time it takes to get a bad night’s sleep. We’ve got so many comments and submissions that we can’t possibly even read them all, let alone act on them as moderators.”

WallStreetBets Reddit Group: What Is It? (2024)

FAQs

WallStreetBets Reddit Group: What Is It? ›

The WallStreetBets subreddit is a prime example of the social investing phenomenon, where average people with brokerage accounts — called retail investors — meet online to discuss stock trading strategies.

What is WallStreetBets on Reddit? ›

r/wallstreetbets, also known as WallStreetBets or WSB, is a subreddit where participants discuss stock and option trading.

What is the point of WallStreetBets? ›

WallStreetBets (WSB) - a subreddit dedicated to conversations about options trading and stocks, often referred to simply as /r/wallstreetbets.

Who is the famous guy on WallStreetBets? ›

Keith Patrick Gill (born 1986) is an American financial marketer and educator and individual investor known for his posts on the subreddits r/wallstreetbets and r/SuperStonk.

Is Wall Street bet still reliable? ›

While some have dismissed WSB—and meme stocks in general—as a passing fad, new research from Capital.com has found that trading volumes linked to WSB meme stocks did not decrease over the course of 2021 and remained strong in the second half of the year. Entertainment company AMC is a notable example of a meme stock ...

Is short squeeze illegal? ›

Although short squeezes may occur naturally in the stock market the U.S. Securities and Exchange Commission (SEC) states that abusing short sale practices is illegal. In addition, short sales used to manipulate the price of a stock are prohibited.

Why do short squeezes happen? ›

It occurs when a security has a significant amount of short sellers, meaning lots of investors are betting on its price falling. A short squeeze begins when the price of an asset unexpectedly jumps higher. It gains momentum as a significant number of the short sellers decide to cut losses and exit their positions.

Why is mirror trading risky? ›

Mirror trading is risky because you don't know the other person's trading style. Also, you don't know when they will enter and exit their trades beforehand.

How rich is Roaring Kitty? ›

Including Gill's $29,276,400.56 in cash, his net worth can be approximated to be at least $400 million. This is the most insight observers have had into the investor's positions and net worth since his last Reddit post, in 2021.

Why do they clap at the stock exchange? ›

The opening and closing bells on the stock market tell traders when they are allowed to start or stop trading. In early stock markets, this role was played by a gavel.

What does it mean to work in Wall Street? ›

Stock exchanges, investment banking firms, commercial banks, brokerages and broker-dealers, financial services, and underwriting firms all symbolize Wall Street. It's a globally recognized expression that, to some extent, ever refers to the U.S. financial system.

Who is behind WallStreetBets? ›

Key Facts. James Rogozinski—who founded the WallStreetBets subreddit in 2012—accused Reddit of breach of contract and trademark infringement in the suit, according to the Journal.

Who is the rich stock market guy? ›

Warren Edward Buffett (/ˈbʌfɪt/ BUF-it; born August 30, 1930) is an American businessman, investor, and philanthropist who currently serves as the chairman and CEO of Berkshire Hathaway. As a result of his investment success, Buffett is one of the best-known investors in the world.

What is the safest bet to place? ›

Double Chance

This is also one of the easiest and safest bets on football because it involves two possible outcomes. You pick one of three options: a home win or draw; away win or draw; home win or away win. To put it simply, if the bet wins, your team either has to win or end up in a draw.

How much did Keith Gill make from GameStop? ›

The profit on Keith Gill's GameStop trades

It consisted of two parts: 5 million shares of GameStop stock purchased for $21.27, worth approximately $116 million at the time of the post. 120,000 June 2024 $20 call options purchased for about $5.68, worth nearly $66 million at the time of the post.

What is the safest market to bet on? ›

The safest betting market is called Double Chance. This is when bettors get to pick two of the three potential outcomes in a game like soccer, where ties are in play. So bettors can pick Team A and a tie, Team B and a tie, or Team A and Team B as their two potential outcomes. It is low risk, low reward.

What are Reddit bots for? ›

A Reddit bot is a program that can monitor posts, comments, and other users' actions and autonomously respond to them. For example, you can create a Reddit bot that scans all the comments in the community r/funny, one of the largest subreddits, and replies to those containing the word 'dog.

Can you win money on Reddit? ›

Yes, you can earn real money from Reddit. You will not be paid directly from Reddit. However, you will find opportunities to earn money through subreddits, which are niche forums within Reddit.

What is Reddit stock called? ›

Reddit Inc RDDT:NYSE.

What does share on Reddit do? ›

When users click the share button, they can share the post in various ways, including sharing it to different subreddits, via a direct link, or through external platforms like social media or email.

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