Saqib Iqbal Ahmad

NEW YORK, (Reuters) – The mood has changed dramatically in the past year after a dramatic rally in GameStop shares (NYSE:). Wall Street was captivated by GameStop’s stock prices. This triggered a mania about so-called meme stocks. It also put retail investors in the forefront as a market force.

GameStop shares fell from their peak but are still well above the levels seen before the meme stock boom. A similar trend has been followed by other popular stocks such as AMC Entertainment Holdings (NYSE:) Holdings.

Not only are meme stocks losing their shine, Individual investors and professional money managers alike now have to contend with a hawkish https://www.reuters.com/business/finance/investors-look-prune-portfolio-risk-fed-hawkishness-rules-markets-2022-01-27 Federal Reserve, with expectations of tighter monetary policy battering assets that soared over the last two years and stirring volatility https://www.reuters.com/business/volatile-markets-fed-uncertainty-add-us-dip-buyers-risks-2022-01-25 in broader markets.

GRAPHIC: The boom and the bust, https://fingfx.thomsonreuters.com/gfx/mkt/klvykmemavg/Pasted%20image%201643217673693.png BOOM AND THE BUST

Although they are still trading at a higher level than when they started in 2021, many stocks involved in meme-stock trading have seen their stock prices rise. AMC (GameStop) and GameStop still have a 600% to 400% difference in closing prices from December 31, 2020. Others, such as BlackBerry (NYSE): show a modest increase of 14%.

Others aren’t as fortunate. Clover Health is an example. It was 72% higher in 2021, but now trades at 86% of its 2021 start level.

GRAPHIC: Meme stock mayhem, https://graphics.reuters.com/USA-STOCKS/dwpkrzydavm/chart.png MEME STOCK MAYHEM

Many times, the early movers at the meme stock party and those that took profits quickly were rewarded. Late-comers were often punished. Many stocks purchased in the 2021 trade frenzy currently stand between 70%-95% lower than their most recent highs.

GRAPHIC: Single stock options, https://graphics.reuters.com/USA-STOCKS/egvbklnodpq/chart.png OPTIONS

Options have been a popular tool for investors looking to play the rally and their heavy usage helped exacerbate https://www.reuters.com/business/what-is-gamma-squeeze-how-did-it-drive-up-amcs-stock-price-2021-06-03 the swings in some stocks.

The popularity of options trading without commissions on platforms like RobinHood or Webull has increased their appeal to individual investors.

Stock options that are only available in one stock have become very popular. The trading volume of individual stock options rose to record heights, making them up 70% at one time.

The market share of single stock options has dropped to 60%, but is still higher than it was pre-2021. This suggests that retail investors are continuing to be interested in options.

GRAPHIC: Short interest, https://fingfx.thomsonreuters.com/gfx/mkt/zgpomjwlypd/Pasted%20image%201643231561840.png SHORT WORK

One year ago, institutional investors reacted to hedge funds’ bets against GameStop shares and other companies.

But while the surges in GameStop and other meme stocks made some bears skittish, the practice of shorting stocks – or selling borrowed shares in the hopes of buying them back at a cheaper price – remains a popular strategy in markets.

Peter Hillerberg cofounder of Ortex, a financial analytics company. He stated that “short interest has fallen rapidly in certain stocks as short-sellers leave positions to ensure they aren’t caught out in the Next GameStop Event.”

However, it does not appear to have made a difference as overall short interest for all U.S. listed stocks is now 30% higher than it is a year earlier. It is clear that the stock market is willing to be shorted is high.” he stated.

GRAPHIC: WallStreetBets, https://fingfx.thomsonreuters.com/gfx/mkt/znvnejdqlpl/Pasted%20image%201643225852296.png WALLSTREETBETS

Reddit WallStreetBets is a forum for individual investors where they exhort each other not to use hedge funds. It saw its membership grow in the aftermath of the meme stock drama last year, but engagement still remains below the highs of early 2021.

It boasts 11.5 million members, up from the 1.7million in December 2020. The number of daily postings has fallen to less than 1,000 from the high of 64,000 one year ago.

Despite volatility affecting asset prices, this doesn’t necessarily mean retail investors are leaving the market.

Individual investors bought https://www.reuters.com/article/global-stocks-vanda/retail-investors-kept-buying-u-s-stock-on-fed-day-vanda-idUSL8N2U734X a net of $1.66 billion in equities on Wednesday, when a hawkish U.S. Federal Reserve outcome caused wild gyrations in markets, data from Vanda (NASDAQ:) showed. This was the largest figure since November 30, when a net $2.2 trillion was purchased.