WallStreetBets, the infamous subreddit credited with helping to spawn the meme-stock phenomenon, is giving its regular readers a taste of what it was like on the platform during the trend’s heyday in early 2021.
As meme-stock mania has returned, traders on the platform bragged about their gains and urged one another to hang tough, even as volatility rocked a few of the latest crop of buzzy names on Wednesday. Hundreds of posts were made on WallStreetBets this week.
One trader shared screenshots on the platform showing they had reaped an $850,000 windfall from a big bet on Kohl’s. Another showed they had turned a $45 punt, or long-shot bet with a potentially large payoff, on out-of-the-money call options tied to shares of the big-box retailer into more than $15,000.
“If you look at what the energy is like on there, man, it’s like 2021 all over again,” said one person who occasionally posts on WallStreetBets and spoke with MarketWatch by phone early Wednesday. He asked that he be identified only by his first name, Dan.
A screenshot from his brokerage account showed Dan had plunked down $100,000 on shares of Krispy Kreme Inc. DNUT late Tuesday afternoon after seeing a post touting the stock on the subreddit.
Shares of Opendoor Technologies Inc. OPEN had already taken off the week before, fueled by social-media buzz. Kohl’s Corp. KSS joined the party on Tuesday, tallying big gains amid a surge in trading volume and demand for bullish options contracts tied to the stock.
Dan said he had always regretted missing the boat on the run-up of GameStop, the original meme stock, when he decided to take a shot on Krispy Kreme.
That turned out to be a prescient decision. About an hour before the opening bell, the stock was up by about 40% in the premarket session. Dan, who was riding in an Uber on his way to work at his job in tech sales, said he was feeling good.
“I’m already up by $45,000, and that’s in about one hour of trading,” he said. He was satisfied that the bet, which he jokingly described as his “insane doughnut position,” was paying off.
The euphoria was short-lived, however. More meme stocks joined the party on Wednesday, with shares of GoPro Inc. GPRO, Beyond Meat Inc. BYND and of course Krispy Kreme soaring in early trade. But by the time the closing bell rang on Wednesday, much of their early gains had evaporated. Shares of Kohl’s and Opendoor finished lower, falling 14.2% and 20.5%, respectively, according to FactSet data. Krispy Kreme finished with a gain of 4.6%.
Dan told MarketWatch he sold his Krispy Kreme position around midday and made about $6,000. He added that the post on WallStreetBets that had initially inspired him to bet on Krispy Kreme tried to make the case that the stock was a smart long-term play. But Dan said he ignored most of these details. He focused instead on a comment highlighting a volume spike in options tied to the stock.
“I would never invest in this stock on any given day, other than that this guy posted yesterday looking at the options flows and I thought ‘there’s going to be a gamma squeeze,’” Dan said.
A “gamma squeeze” occurs when a surge of activity in the options market spills over into the stock market. Options market makers are essentially forced to pump up prices of the underlying shares as they scramble to hedge their exposure to the calls they have sold.
Activity in bullish call options tied to Opendoor soared last week, helping to drive the stock’s parabolic move.
Another trader shared screenshots with MarketWatch showing he had turned a $250 bet on Krispy Kreme calls into nearly $6,000 after buying 50 contracts for 5 cents apiece at around 11:30 a.m. Eastern on Tuesday, and selling them at the opening bell on Wednesday for $1.30.
He put the trade on just as volume in Krispy Kreme was starting to pick up on Tuesday.
“My thesis was I am lighting $250 on fire but we are in some kind of meme mania and [Krispy Kreme] is pretty blatantly a meme ticker so I might get lucky,” he said via chat.
After losing money betting on GameStop Corp. GME during the original meme-stock boom, the trader said he understood that he needed to act quickly this time around.
The meme-stock craze got its start in early 2021, when shares of GameStop soared, rising as much as 2,463.7% in January of that year, Dow Jones Market Data showed. An army of retail traders betting on the stock ultimately forced a major Wall Street hedge fund to go bust. The whole episode inspired Congress to drag some of the major players down to Capitol Hill for hearings.
“You are getting a glimpse [of what it was like back then] but I don’t think you will see anything like what happened with GME ever again,” the trader said. During the pandemic, millions of Americans were sitting around with nothing to do, with government stimulus checks burning a hole in their pockets.
A third investor who, like the others, asked to remain anonymous, provided screenshots showing he had made about $6,000 in a day buying shares and call options tied to Krispy Kreme.
“You see the degenerates on WSB start to pick it up, someone had a good writeup on it and then you see the open short interest and realize that it could get a quick 20%-30% pump,” he said.
“Anything that has an open short interest of 30%+ and that is a brand household name has the potential to pump once WSB gets a hold of it,” he said.