Frenzy FAQ: GameStop, WallStreetBets AMA - and everything you need to know

Written by
András I.
Fact checked by
Gyula L.
Updated
Apr 2021
Frenzy FAQ: GameStop, WallStreetBets AMA - and everything you need to know

As we analyzed the recent market chaos around GME, we sat down to collect the questions that everyone is seeking an answer for.

Below, we have summarized the most frequently asked questions in relation to the latest market frenzy. We have also added questions coming directly from our customers, as we believe that the answers can be beneficial for all.

If you have any further questions, feel free to comment under this article, or drop us an email at [email protected]. We plan to update this page regularly in the future.

Stay safe! :) 

The BrokerChooser Team

Questions and BrokerChooser's Answer

Updated on 2021. 02. 17. 12:00 GMT / 07:00 EST

 

Question: Who makes everything transparent and easy for no experience but wants to just get started. Is immediate edge all that it is. Is immediate edge covered by regulations for australia. Can you use your paypal account to get started.This is easy for those that have confidence with online but this rate there are so many hackers and pop ups and just rubbish. Genuine require to be put on the right path thanks. I have half tried some of these but it has ended as a run around and not helpful. What is the accountants you get and managers who don't help but leave you money without working the money, feed back would be appreciated thanks

BrokerChooser's Answer: We would recommend checking this broker comparison table: https://brokerchooser.com/compare-brokerage. You can select the "brokers for beginners" in the left filter bar and you can also filter for brokers that provide electronic wallets.

Question: Can I use LLC to open an account [at Webull]?

BrokerChooser's Answer: Thank you for sending your question! Webull doesn't provide a corporate account, sadly you can't open an account for an LLC.

Question: What caused this frenzy? 

BrokerChooser's Answer: The frenzy was caused as a result of multiple developments. First, a reddit user realized the massive amount of short positions on GME, and argued that because of this the company is undervalued. He started buying call options and long positions to prove it, and post his gains overtime on r/WallStreetBets. His arguments got more popular among users, and more and more people joined the bandwagon. Eventually, the interest drove prices up massively, which gained media interest, and interest from new clients. 
 
The massive surge of new clients caused some brokers to shut down, which led to outrages and mistrust on the markets.

Question: Is it safe to uses tradding 212? 

BrokerChooser's Anwser: BrokerChooser features only brokers that are regulated by at least one top-tier financial authority, such as UK FCA or US SEC. Trading 212is regulated by the top-tier FCA. However, at the moment Trading 212 doesn't allow new account openings at the moment.

Question: How can it be right that trading platforms were selling people's shares; implemented Stop Losses when none were set; and restricted the amount of shares one could/can buy whilst making sure they could/can sell everything? This is not a free market.

BrokerChooser's Answer: Thank you for your question. Yes, you're right: this is not a good way of business operation that brokers restricted trading. They had to do it because of the volatility and as such, the margin requirements at their clearing partners increased significantly.

Question: Why was it ok for platforms to be shut down which essentially ruined the momentum of it which allowed it to shatter once restrictions were lifted?

BrokerChooser's Answer: There are multiple reasons why brokers halted trading. One explanation is, that the massive flux of interest for certain stocks paired with volatility resulted in more capital requirements towards clearing houses. As a result, clearing houses weren't liquid enough to handle these requirements and brokers had to halt trading for these requirements to be met. 

Question: Is GME squeezed already?

BrokerChooser's Answer: Sadly, we are not eligible to comment on market movements, as it can sound like financial advice, so we’ll try to avoid that. And also, we are not really sure if it happened, or will happen. It’s worth checking the short ratio of GME, i.e. what percentage of outstanding are shorted. If the stock has a high short ratio, then it’s more likely to get short squeezed.

Question: CAN I BUY GME on Firstrade?

BrokerChooser's Answer: Yes, GME is available on Firstrade. We've been monitoring Firstrade for a few weeks now, and they should have no issues whatsoever. 

Question: When will Sofi offer premarket and aftermarket trading??? Its a deal breaker for Alot of investors in choosing a brokerage..

BrokerChooser's Answer: We have no info about when SoFI is going to offer premarket and aftermarket trading. Generally, retail clients can't trade pre- and aftermarket, but can send orders to be filled on market open. Premarket and aftermarket trades can of course influence your market fill price.

Question: Where can I buy GME shares now?

BrokerChooser's Answer: In BrokerChooser’s Uptime Monitor, you can track which brokers have trading restrictions in place or had outages in the recent period. You can find a separate Uptime Monitor for US or EU clients, as well as for other clients globally.

 

Question: Which broker doesn’t have platform outages or trading restrictions right now?

BrokerChooser's Answer: We continuously monitor around 50 brokers to see whether they have platform outages or trading restrictions. We feed the results into our so-called Uptime Monitor, which you can find here. As of 2 February 2021, 15 out of the 50 brokers had major platform outages or trading restrictions put in place.

 

Question: Where can I find a broker that suits my preferences and is available in my country?

BrokerChooser's Answer: You can read detailed analyses in our Broker review section. If you go to the “Account opening” section of a specific broker review, you can see if that broker is available in your country.

If you'd like to compare brokers in detail, you can check our Broker Comparison Table. At the top of the table, you can select your country of residence, and set additional filters depending on your preferences.

Lastly, if you need a quicker solution, you can use the Find My Broker questionnaire tool. After answering a few short questions, you will be presented a list of brokers recommended based on your answers. Just like in the previous tools, you can select your country of residence at the first question.

 

Question: What is a short squeeze?

BrokerChooser's Answer: In a nutshell, a short squeeze is a chain of events whereby a highly shorted stock’s price skyrockets because many short positions are liquidated. You can find a detailed explanation in this article.

 

Question: Why has Robinhood restricted the trading of GME?

BrokerChooser's Answer: Robinhood said that it restricted buying of specific shares because clearinghouses raised the deposit requirement related to equities trading. Robinhood’s deposit requirements on certain stocks increased ten-fold during the last week of January. This prompted the brokerage to place temporary buying restrictions on a small number of securities that the clearinghouses had raised their deposit requirements on. You can find more details on Robinhood’s website.

 

Question: Is it normal for brokers to halt trading? 

BrokerChooser's Answer: It's not the brokers who halt the trading, but the exchange where the specific asset is traded. These halt mechanisms are called "circuit breakers" and their purpose is to curb the sharp increase in prices. In recent weeks, there were frequent cases when trading in volatile stocks was halted.

 

Question: Is there a difference between restricting and halting a stock?

BrokerChooser's Answer: Yes. Restrictions - such as allowing you to sell a stock but not to buy it, or placing limits on the number of stocks you can buy - are interventions by brokers, and they differ from one broker to another. On the other hand, halting trading of a stock is an intervention by the exchanges, and it means it’s halted at all brokers. Usually, a volatility halt doesn’t last long (5-10 minutes), but a halt pending news can last hours.

 

Question: Can my broker close (buy me into) my short position in a stock?

BrokerChooser's Answer: Stocks you short that have a very high short interest may be subjected to a buy-in. This means that your broker might close out a part or all of your shorts in a stock, by forcing you to buy these stocks at the current market price. The reason they would do that is that in the case of highly shorted stocks, it becomes extremely difficult to borrow the shares going forward and lenders are demanding it back. Usually this situation occurs in stocks that have a less liquid float.

 

Question: What does it mean to hold? Why are people holding a stock that is losing value?

BrokerChooser's Answer: It can mean several things. In everyday terms, holding simply means not closing a position. Nowadays, it also has another meaning, popular within subcultures like reddit: it can describe the situation of not closing the position at all, even if it underperforms, or when it’s against all odds that it will be profitable for the investor.


Question: What is a call option?

BrokerChooser's Answer: A call option is an instrument that gives you the right to buy certain security at a previously agreed price, regardless of the current market price. This means you can make profit on rising prices without actually buying the shares.

Got questions?
Engage with our growing community of traders and investors like you to find your answers.
Join now

Author of this article

András Iván
András Iván

András is a former broker analyst for BrokerChooser. He has years of experience in investing and trading equities, options and bonds. He believes that active trading and a more passive investing approach both have merits and everyone can find a strategy that fits their needs. He's eager to help identify the characteristics of specific brokers, so each client can find the best match.

Everything you find on BrokerChooser is based on reliable data and unbiased information. We combine our 10+ years finance experience with readers feedback. Read more about our methodology.

Follow us

Regional settings

×
I'd like to trade with...