The losers: Hedge-fund short-sellers wh0 are learning John Maynard Keynes’s lesson the hard way — “The market can remain irrational longer than you can remain solvent.”
How it works: Thanks to Robinhood and other stock-trading apps, trading options in GameStop (or BlackBerry, Bed Bath & Beyond or any other smallish company Wall Street traders have bet against) is easy, fun, and carries an irresistible commission of exactly $0.
Giant hedge funds like Melvin Capital now find themselves at the mercy of thousands of small investors using the internet to coordinate their buying attacks.
The bottom line: Short-selling — betting that a company’s stock is going to fall — is a crucial element of efficient markets. But, thanks to Reddit, it has also never been more dangerous.