Trading GameStop | How To Trade GameStop Shares
Day trading GameStop is big business after a tumultuous period of market activity in recent weeks. Sparked by the Reddit day-trading forum, amateurs took on wall street hedge funds in an attempt to bruise egos. With their mission a success, a long line of retail day traders has started buying and selling GameStop (GME) stock in recent weeks. See our guide to trading GameStop today.
GameStop Price History
The American high street chain that sells video games, GameStop Corp., saw a frenzy of market activity when retail day traders, spurred on by social media, took aim at the wall street giants that planned to short the stock, traded on the NYSE.
The amateur traders, many of whom were part of the ‘wallstreetbets’ forum, which had over four million members, helped drive the share price up by over 1,700% to north of $480 per share. An impressive rise given its sub $20 previous value. Many of the prominent hedge funds, including Melvin Capital and Point72, were forced to abandon their short positions, accumulating losses above $5 billion.
The flurry of activity relented in early to mid-February with the stock price dropping to $40. However, GameStop’s share price has risen again in recent weeks with its price now back above $200. For further details on GameStop’s eventful 2021 journey, see our other articles here and here.
Arguably one of the most talked about stocks of 2021, trading GameStop promises the volatility many investors look for in their search for trades. But how should you approach trading GameStop and where can you buy the sought after stock?
Before you start buying GameStop shares, it’s worth considering the different ways you can trade the hotly debated stock.
Contracts for difference let you speculate on the future price of GameStop shares, either up or down, without owning the stock itself. Once you have taken your position and bought a CFD, your profit or loss will move in line with GameStop’s share price. Returns are calculated by multiplying the market movement by your position size in dollars per point.
Note, given the volatile nature of GME’s recent share price, we’d recommend using stop-losses and take-profits to limit your risk exposure and protect your capital.
Spread betting is another straightforward way to trade GameStop without buying physical shares. If you expect the GME price to rise, you would open a buy order while if you think its price will fall, you would sell.
When spread betting GameStop, you’ll put down a certain amount of capital per point of movement. Your profit or loss is then multiplied by this movement to work out your return. Let’s say you buy GameStop because you think the stock will increase in price and you place a spread bet for £20 per point. If GameStock’s share price increases by 10 points, you’d make £200 (10 x £20). If the price of GME fell by 5 points, you’d lose £100 (5 x £20).
Note, when trading GameStop using the vehicles listed here you can leverage positions, meaning for a small capital outlay you can increase your position size using funds borrowed from your broker.
Trading GameStop options is another viable technique. In fact, those who bought GME stock early on made smaller gains than those who bought call options on GME stock.
An option is a contract that gives you the right to buy (call) or sell (put) GameStop stock at a set price at a specific time in the future. A stock option typically represents 100 shares of the underlying stock, such as GME. Many investors are placing puts to trade on the perceived eventual end of the GameStop short squeeze. Puts are essentially an alternative to shorting GameStop stock.
You can also buy physical GameStop shares. With this route, you will directly own a stake in the company. Your profit or loss will be the difference in price between when you buy GME shares and when you sell them.
At most stock dealing brokers, you can buy GameStop shares based on either the number of shares you would like to buy or how much capital you have to invest. Most providers offer a user-friendly desktop or mobile trading platform where you can use technical analysis or follow news announcements to inform trading decisions.
You can buy and sell GameStop stock at many popular brokers, including eToro, which offers zero commissions.
Final Word On Trading GameStop
Trading GameStop has proven extremely volatile for retail investors in recent months. Individuals have a choice of trading vehicles when buying GameStop, from CFDs and spread betting to share dealing and options. Whichever path you take, make sure to take a careful approach to risk management, noting market volatility can lead to losses as well as profits.