The power of institutional investors was recently brought into question when members of the subreddit known as r/WallStreetBets stood up against them and defended the game company, GameStop. The event did not only shaken the financial world, but also opened doors for the Reddit group. The most recent example of this is the FTX derivatives exchange listing the Wall Street Bets Index.
FTX lists support for a brand-new WSB Index
According to a recent announcement by the derivatives exchange, FTX has just listed WSB index quarterly futures products. According to the platform, the Index comprises of the stocks that the group moved to save from institutions that were engaging in shorting their stocks.
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Those include NOK, BB, AMC, GME, SLV, and even DOGE, which represent 99% of the Index, equally-weighted (0.165) at the start. The remaining 1% (0.01) is FTT.
The listing took place two days ago, and after the initial surge to $700, the index has seen a drop to a new average price of $450.
What happened with the WSB?
The Wall Street Bets group is a group of retail investors that were mostly active on Reddit and Discord. The group consists of regular people who tend to employ rather aggressive investment and trading strategies, often taking high risks for the benefit of high rewards.
The group recently noticed that institutional investors are shorting the stocks of a gaming company called GameStop. The firm was already seeing its stock price decline over time, partially due to COVID-19, and in part because games have been shifting towards their digital version, which brought the firm’s products’ relevancy into question.
Institutional investors made their moves with the intention of making money despite the fact that it would have destroyed the company. WSB came to aid by mass-purchasing GameStop’s stocks, thus increasing their price.
With institutions already in short positions — meaning that they bet that the price of the stock will drop — they lost a lot of money when the stock price skyrocketed due to sudden increased demand.