GameStop climbs 11% in volatile premarket trade as Reddit traders dig in

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Tiffany Hagler-Geard | Bloomberg | Getty Images

GameStop shares gained 11% in premarket trade on Wednesday as the short squeeze fueled by retail traders on Reddit looks to revive itself following a steep decline.

The stock had been down by more than 11% earlier on Wednesday morning but swung into the black shortly after 5 a.m. ET.

Shares of the bricks-and-mortar video game retailer surged 1,625% in January and 400% just last week, as traders led by Reddit thread WallStreetBets piled into the stock.

But the momentum had waned earlier this week. Gamestop stock dropped 60% on Tuesday and it has lost more than 70% of its value since Friday.

AMC Entertainment, another heavily shorted stock that was also targeted by Reddit traders, was up by around 4% in premarket trade.

Robinhood and other retail trading apps continue to limit some buying of a collection of stocks pursued by the Reddit thread. Many Wall Street hedge funds began short-covering toward the end of last week after taking significant losses in the squeeze.

Short selling is a strategy in which investors borrow shares of a stock at a certain price on expectations that the market value will fall below that level when it’s time to pay for the borrowed shares. Buying back borrowed shares to close out a short position, whether for a profit or loss, is known as short-covering.