MADISON (WKOW) – Jeremy Pezua of Madison concedes he’s an amateur stock trader, but he’s also one of thousands who’s profited from a surge to boost the shares of companies such as GameStop in response to Wall Street professionals betting those firms would decline.
“I still hold my position in GameStop,” Pezua says. Pezua says he pursued day trading in the stock market after gaining knowledge and buying into strategy discussed in a popular, online forum. “I stumbled upon this…and I think WallStreetBets is really giving a tool to the people.”
The stock trading by the legion of people on forums and trading apps such as Robinhood targeted large hedge funds short selling GameStop and others. That produced a short squeeze, where short sellers who have placed their bets on a stock’s fall, rush to hedge their positions or buy the stock in the event of an adverse price movement in order cover their losses.
“I think I made $2,000 on my initial investment,” Pezua says.
Another company getting a boost from the amateur traders focusing on stocks being sold short is Milwaukee head phone maker Koss.
“I know I got into at 8 ($8 dollars a share),” says Milwaukee’s Joseph Taylor of his recent stock purchase. “As soon as Koss made $40 a share I was ecstatic.”
“And then someone texted me when it was at 60, and I ran to my computer and immediately sold it,” Taylor says.
Selling hundreds of shares in Koss stock turned Taylor a cool profit. “$30,000,” he says.
Taylor believes the phenomenon of the surging stock prices of legacy, technology names and others in response to institutional Wall Street’s position to profit from their demise will change the landscape.
“I think the edge Wall Street has is so small now compared to the normal investor,” Taylor says.
“They do those dinners in New York, ‘Ideas Dinners,’ Taylor says. We’ve seen Billions. These are things they do. There’s no difference between that and running a forum,” he says.
“I believe technology, whether that’s social media on Reddit and different apps like Robinhood are creating the perfect storm for investors like myself,” Pezua says. “In a sense, we’re creating a people’s hedge fund.”
After some platforms placed limits on trading Thursday in response to the volatile markets and amidst worries about liquidity, the shares of several, surging companies fell. But with limits lifted Friday, they rallied. Koss closed at $64 a share. The company also outperformed in its latest earnings release.
Another beneficiary of the banding together of amateur traders is movie theater giant AMC. And Taylor says day traders are not relying solely on the vulnerability of short-selling positions as they assess where to put their money.
“The stock was so cheap,” Taylor says. “People are going to the movies when we get through the coronavirus.”