Published February 5, 2021
One factor was growth in the number of investors. In the past year, more new investors opened accounts – at least 10 million – faster than ever before.
Additionally, a shift to no-commission trading unlocked a wave of activity. With coronavirus-related lockdowns in place, people had little else to do. There were no major sports to bet on, so the stock market took its place. Trading activity started to surge. Recently, equity volume was triple the amount as on an average day in 2019.
Individual investors have always been small fish compared to the sharks of Wall Street: hedge funds. Before the pandemic, activity from individuals (“retail investors”) made up about 15 percent of daily trading volume. Now, it consistently makes up more than 20 percent. A single trader, from his basement office, led the change in this increase. Why?
Social media has given investors message boards and group consciousness, and that has evolved into market action. A single investor working on a social media platform called Reddit targeted a single stock with enthusiasm: GameStop. Convinced that GameStop offered opportunity and noting that some very big players had large short positions, he attacked with a relatively small commitment. One day he bought $53,000. By using options, he amplified his bet and made as much as $46,000 in a single day. Over the next year and a half, by using Reddit as his message board, “Roaring Kitty,” as he called himself, promoted the company and enthusiasm grew.
Encouraged by […]