In the recent weeks, you might have read about GameStop’s phenomenal price rally and wild swings in-between – reaching $480+, up almost 2500% from the start of the year when it traded at just $18+. So, what’s going on there? A little backstory Hedge funds – funds that pool money an employ a variety of strategies for returns – were shorting GameStop’s stock for a long period of time. When you short a stock, you are actually borrowing someone’s shares to sell, in the hope that the price will fall, you buy back at a cheaper price and you pocket the difference. A visual primer on shorting stocks Short sellers have to eventually buy back the borrowed shares, which puts the risk of downside almost unlimited because the price of the stock can technically go to infinity, and the short sellers must cover their positions by buying back the stock at whatever price. Some retail traders saw GameStop’s high short interest...