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GameStop shares have tumbled from their peak, though they are
far above levels touched before the meme stock craze. Other
stocks popular with retail investors, including AMC
Entertainment Holdings, have followed a similar path.
It's not only meme stocks that have lost their luster.
Individual investors and professional money managers alike now
have to contend with a hawkish Federal Reserve, with
expectations of tighter monetary policy battering assets that
soared over the last two years and stirring volatility in
broader markets. (Graphic: The boom and the bust,
https://fingfx.thomsonreuters.com/
gfx/mkt/klvykmemavg/Pasted%20image%201643217673693.png)
BOOM AND THE BUST
Despite sharp drops from their 2021 peaks, several of the stocks
caught up in the meme-stock trading frenzy are trading higher
then they were at the start of 2021. AMC and GameStop remain up
about 600% and 400%, respectively, from their Dec 31, 2020
closing levels. Some, like BlackBerry show a more modest gain of
14%.
Others haven't fared as well. Clover Health, for instance, which
at one point in 2021 was up 72% for the year, is now trading 86%
below its 2021 starting level. (Graphic: Meme stock mayhem,
https://graphics.reuters.com/USA-STOCKS/dwpkrzydavm/chart.png)
MEME STOCK MAYHEM
In many cases, those who arrived at the meme stock party early
and were quick to take profits were rewarded, while late-comers
were punished. Most of the stocks swept up in the 2021 trading
frenzy now stand anywhere between 70% to 95% below their recent
highs. (Graphic: Single stock options, https://graphics.reuters.com/USA-STOCKS/egvbklnodpq/chart.png)
OPTIONS
Options have been a popular tool for investors looking to play
the rally and their heavy usage helped exacerbate the swings in
some stocks.
Heightening their appeal among individual investors was the
growth of commissions-free options trading on platforms such as
RobinHood and Webull.
Single stock options have been especially popular. Trading in
these contracts on individual stocks jumped to a record high, at
one point making up as much as 70% of the overall volume in
options markets.
Single stock options' overall market share has fallen to about
60% but remains higher than pre-2021 levels, suggesting that
interest in options plays among retail investors remains robust.
(Graphic: Short interest,
https://fingfx.thomsonreuters.com/
gfx/mkt/zgpomjwlypd/Pasted%20image%201643231561840.png)
SHORT WORK
A year ago, retail investors rallied to squeeze hedge funds that
had bet against shares of GameStop and other companies, bruising
institutional players such as Melvin Capital in the process.
But while the surges in GameStop and other meme stocks made some
bears skittish, the practice of shorting stocks – or selling
borrowed shares in the hopes of buying them back at a cheaper
price – remains a popular strategy in markets.
"Short interest in some stocks has decreased rapidly as
short-sellers exit positions to ensure that they are not caught
out in the next GameStop event," said Peter Hillerberg,
co-founder of financial analytics firm Ortex.
"However ... this does not seem to have resulted in a
significant effect as the overall short interest in all
U.S.-listed stocks is currently 30% higher than it was a year
ago, demonstrating the willingness to short stocks is still
high," he said. (Graphic: WallStreetBets,
https://fingfx.thomsonreuters.com/
gfx/mkt/znvnejdqlpl/Pasted%20image%201643225852296.png)
WALLSTREETBETS
Reddit's WallStreetBets, the forum where individual investors
exhorted each other to defy hedge funds and coordinated their
stock buying, saw its membership swell in the wake of last
year's meme stock drama, though engagement remains well below
the peaks of early 2021.
The forum boasts around 11.5 million subscribers, up from 1.7
million in December 2020, while daily posts have fallen to under
1,000 from a high of about 64,000 a year ago.
That doesn't mean that retail investors have dropped out of the
market, even as volatility has rocked asset prices.
Individual investors bought a net of $1.66 billion in equities
on Wednesday, when a hawkish U.S. Federal Reserve outcome caused
wild gyrations in markets, data from Vanda showed. That was the
highest figure since a net $2.2 billion bought on November 30.
(Reporting by Saqib Iqbal Ahmed; Editing by Ira Iosebashvili,
Alexandra Hudson)
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