But if the stock rises sharply, those investors may be forced to buy back the stock at a loss. Using derivatives and coordinating buying on websites such as the Reddit forum wallstreetbets, retail investors have had an outsize impact on markets in recent months. Hedge funds Melvin Capital Management and Citron Capital closed out short positions in GameStop earlier this week after buying pressure pushed up the company’s shares. Barring wider trading restrictions, similar patterns could play out over several weeks as short sellers unwind their bets, said Michael Purves, chief executive of Tallbacken Capital Advisors. Some firms run strategies that involve holding both long and short positions on a stock, he said, and as a result, certain stocks could see a surge and then a sharp drop as those firms adjust their positions.

Source: bd News24 January 29, 2021 03:00 UTC