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Summary
- GameStop shares eased on Thursday after Robinhood and Interactive Brokers denied further long positions in the stock.
- To curb volatility, the US brokers have raised margin requirements across the securities.
Following days of wild frenzy, US games firm GameStop’s shares crashed 44% on Thursday. However, the stock also touched over $490 during the day. More importantly, GME stock was up 61.15% in the after-hours trading.
Source © Kalkine Group 2021
Since GME stock was nearly 61% higher in OTC markets, the US markets will likely see further volatility on Friday. Many US brokers took steps to control the volatility as they restricted trading and raised margins.
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Brokers had placed restrictions on individual shares, which were only available for closing positions and not opening further long positions. Most of these shares primarily included heavily shorted stocks which had become extremely volatile.
Besides, brokers also raised margin limits on many securities, including options, derivatives, and ordinary shares. This week has been quite volatile and extremely interesting for market participants as hedge funds took a beating.
Retail investors, especially day traders, have been phenomenal over the past week. They have been successful in reversing the short piles across equity markets. On Wednesday, the stocks with higher short positions rose significantly as short-sellers closed their short positions.
Source: MegapixlTM
Closing of short positions was also evident in Australian markets on Thursday as some of the most shorted shares on the ASX were among the highest gainers in the ASX 200 index.
Since brokers have raised margins on trades and securities, the trading games for day traders will become more expensive as they would be asked to pay more funds upfront while opening any trades.
US securities law firm Levi & Korsinsky LLP has reportedly commenced investigation against the popular trading retail platforms, including Robinhood and Interactive Brokers. The securities law outfit has commenced an investigation on behalf of iRobot Corp (NYSE:IRBT) investors.
The class action investigation seeks to unearth any potential violations by the brokers, who blocked customers in opening long positions in stocks heavily shorted by institutional investors, including IRBT shares.
(Currency is USD, unless or otherwise stated)
