Short Selling, GameStop And What Risk Management Has To Say About It All

There is something about Wednesdays in January this year.

On January 6, the nation experienced an insurrection. A week later on Wednesday, January 12, Congress voted to approve the articles of impeachment.

On Wednesday, January 20th, the U.S. witnessed an inauguration. Finally, on Wednesday, January 27, Wall Street felt the impact of coordinated retail investors.

The events unfolding in the wake of the GameStop drama involving ‘David’ retail investors and ‘Goliath’ institutional investors (i.e., hedge funds) will be immortalized in investor lore for generations to come.

While short selling is a tool used by retail investors and hedge funds alike, the latter have enjoyed the upper hand in maximizing potential revenue windfalls realized from the successful execution of this strategy.