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Q: What Is the Difference Between a Trading Halt and a Trading Restriction?

A trading halt is a short-term pause in which the trading of a particular security is temporarily suspended. These are known as regulatory halts. While a trading halt may occur at any point during the trading day, a trading delay is usually imposed at the market’s open.

Jun

2025

What Is the Difference Between Trading Halts and Trading Restrictions?

Trading Halts vs Other Trading Restrictions

By Matthew Warholak | Growing Wealth, invest, Investing | Comments Off

Stock exchanges and financial regulators sometimes impose different types of trading restrictions on individual stocks, including short-term halts or delays, and occasionally longer-term suspensions.

In cases of unusual volatility, financial authorities may halt the trading of all securities, by using a fail-safe measure known as market-wide circuit breaker (MWCB).

Generally speaking, though, more common reasons for trading restrictions include mitigating the impact of company news that could impact a stock’s price, significant economic or global events that impact that security (or the market as a whole), or because there’s a technical problem impacting trades.

The Securities and Exchange Commission (SEC) can restrict the trading of a particular security for up to 10 days, often because the company hasn’t filed the requisite reporting documents.

These trading restrictions can impact listed stocks (those listed on U.S. stock exchanges), as well as over-the-counter (OTC) stocks, which are not traded on public exchanges.

Key Points

• Stock exchanges and regulatory bodies may have reason to impose short- or long-term trading restrictions under various conditions.

• A short-term trading halt usually lasts no more than an hour, and is resolved during the trading day. A delay is usually a brief pause before markets open.

• The SEC can impose a trading suspension for up to 10 days.

• A common reason for a trading suspension is that a company hasn’t maintained its regular reporting to the SEC.

• A trading halt may be applied to a single security or market sector, but a full interruption of trading across markets is also possible.

What Is the Difference Between a Trading Halt and a Trading Restriction?

A trading halt is a short-term pause in which the trading of a particular security is temporarily suspended. These are known as regulatory halts. While a trading halt may occur at any point during the trading day, a trading delay is usually imposed at the market’s open.

A trading suspension is a longer-term restriction on trading a certain security, up to 10 days, enforced by the SEC.

For listed stocks, trading halts and delays are typically put in place by stock exchanges themselves, usually in response to company news that could impact trading outcomes.

OTC stocks, which are not listed on traditional exchanges like the NYSE or Nasdaq, are regulated by FINRA. So FINRA would institute a halt or delay if there were a material reason to pause trading.

💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.

What Is a Trading Halt or Delay?

A trading halt pauses trading for a short period of time, usually less than an hour. Typically the halt occurs in response to company news or announcements affecting a product, company leadership, or other significant news that could change a stock’s price positively or negatively.

A stock exchange can also interrupt trading of a certain security if it deems that the stock does not meet, or no longer meets the criteria for being listed on the exchange.

A trading delay can be imposed by an exchange when a company has revealed significant news after the trading hours of 4 p.m. to 9:30 a.m. Eastern Time — which is often when companies make important announcements.

The idea is to give investors time to absorb the news, and ideally avoid volatile trading.

When an exchange imposes a halt on a certain security, other exchanges that list that stock also respect the halt or delay.

Trading halts are artificial, meaning they are not a natural part of markets — however, they have been in existence for some time. Stock market halts date back to 1987, when the SEC mandated the creation of market-wide circuit-breakers (MWCBs) to prevent a repeat of the Oct. 19, 1987 market crash, also known as “Black Monday,” which was one of the worst days in the history of the stock market.

Reasons for Trading Halts

Trading halts are a means of interrupting market action to prevent volatility from snowballing in response to unexpected stimuli. Halts are implemented for a variety of reasons, including the following.

1. Anticipation of a Major News Announcement

A trading halt might be called during the day to allow a company to make an announcement. As noted, if the announcement is pre-market, it might result in a trading delay rather than a halt, prior to the market’s open. A trading halt or delay allows investors time to absorb the news without reacting.

2. Severe Price Fluctuations

Exchanges may also impose trading halts based on stock volatility, applying to both upside and downside swings in short amounts of time. Whereas news-induced trading delays could be an hour in duration, trading of a certain stock can also be halted when price fluctuations trigger the Limit Up/Limit Down Plan (LULD).

The LULD parameters are designed to halt trading when a stock’s price moves too quickly outside certain price bands. These bands are calculated on a rolling basis, to capture higher- or lower-than-average price movements over five-minute intervals. If a stock enters the so-called limit state (i.e., it hits either the upper or lower end of its range), and doesn’t move within 15 seconds, trading is paused for five minutes.

3. Market-Wide Circuit Breakers

There are also three tiers of market-wide circuit breakers that pause trading across all U.S. markets when the benchmark indices the S&P 500, the Dow Jones 30, and the Nasdaq exceed pre-set percentages in terms of price from the prior day’s closing price:

• Level 1: 15-minute halt when the S&P 500 falls 7% below the previous day’s closing price between 9:30 am ET and 3:24 pm ET.

• Level 2: 15-minute halt when the S&P 500 falls 13% below the previous day’s close between 9:30 am ET to 3:24 pm ET. Level 1 and 2 circuit breakers do not halt trading between 3:25 pm ET and 4:00 pm ET.

• Level 3: Trading is closed for the remainder of the day until 4 pm ET when the S&P 500 falls 20% below the previous day’s close.

4. Correct an Order Imbalance

Non-regulatory halts or delays occur on exchanges such as the NYSE when company news — particularly when released after hours — has a disproportionate impact on the pending buy and sell orders.

When this occurs, trading is halted or delayed, market participants are alerted to the situation, and exchange specialists communicate to investors a reasonable price range where the security may begin trading again on the exchange.

However, a non-regulatory trading halt or delay on exchange does not mean other markets must follow suit with this particular security.

5. Technical Glitch

Trading is halted when it’s determined that unusual market activity such as the misuse or malfunction of an electronic quotation, communication, reporting, or execution system is likely to have a significant impact.

6. Regulatory Concerns

A trading halt may be placed on a security when there is uncertainty over whether the security meets the market’s listing standards. When this halt is placed by a security’s primary markets, other markets that offer trading of that security must also respect this halt. These include:

• SEC Trading Suspension: A five-minute trading halt for a stock priced above $3.00 that moves more than 10% in a five-minute period. These are commonly imposed by the SEC onto penny stocks and other over-the-counter stocks suspected of stock promotion or fraud.

• Additional Information Requested: A trading halt that occurs when a stock has rallied significantly without any clear impetus. This can be common among orchestrated pump-and-dumps or short squeezes. In many cases when the halt is lifted, the stock reverts back down because there are no underlying fundamentals supporting the dramatic rise in price.

💡 Quick Tip: It’s smart to invest in a range of assets so that you’re not overly reliant on any one company or market to do well. For example, by investing in different sectors you can add diversification to your portfolio, which may help mitigate some risk factors over time.

How Long Do Trading Halts Last?

Trading halts are typically no longer than an hour, the remainder of the trading day, or on rare occasions up to 10 days. However, if the SEC deems appropriate, the regulatory body may revoke a security’s registration altogether.

Example of Trading Halts

While most trading halts don’t make headlines, there are a few that investors may remember.

Pending News

In February of 2025, medical device company Know Labs, Inc. (KNW) announced that its trading suspension had been lifted by NYSE American. The trading suspension had been imposed on the company’s common stock, owing to the company’s need to meet compliance standards for listing on the NYSE American exchange (in this case the stock price was found to be above the low-selling threshold for listing on the exchange).

Stock Volatility

Amid the well-known Gamestop vs Wall Street meme stock spectacle in 2021, Gamestop’s stock (GME) saw huge capital inflows over the course of a couple of weeks, leading the NYSE in terms of daily volume. The stock’s intraday volume was so high that it triggered the volatility circuit breaker dozens of times over the last week of January and again on February 2, 2021, when it dropped 42%.

Technical Issues

In early June of 2024, the trading of some 40 ticker symbols on the NYSE, including Berkshire Hathaway Class A shares, were temporarily halted owing to pricing data issues that stemmed from a technical glitch attributed to a new software release. Trading resumed after a couple of hours.

Market-wide Circuit Breakers (MWCBs)

MWCBs were triggered four times in March 2020 in response to the global COVID-19 pandemic lockdowns that caused two of the six largest single-day drops in market history. This was the first occurrence of market-wide circuit breakers since 1997.

The Takeaway

Trading halts, delays, and suspensions are similar, but halts and delays are generally shorter — and are the result of intervention by a stock exchange or FINAR. Trading suspensions are generally put in place by the SEC.

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FAQ

Is a trading halt a good thing?

Generally speaking, the intention of a trading halt is to protect investors, as well as companies, from the impact of significant news events on a stock’s price — or if there’s evidence of non-compliance, fraud, or technical issues. In rare cases, an exchange may halt trading when there’s a major event, such as a natural disaster.

What happens when trading is halted?

A typical trading halt occurs during the course of the trading day (usually 9:30 a.m. to 4 p.m. Eastern Time). This is a temporary interruption of the trading of a single security, and usually it lasts no more than an hour. It may follow a company news announcement, or it may occur after news is released.

What’s the difference between a halt and a suspension?

A trading halt is a temporary pause relating to company news (or factors that could lead to market volatility), and it’s imposed by a stock exchange or by FINRA (in the case of over-the-counter stocks). A suspension is longer-term — up to 10 days — where a stock is removed from trading owing to non-compliance with SEC rules or other regulatory issues.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN-Q225-044

Jun

2025

Bond ETFs Explained

By Amanda Holden | Growing Wealth, invest, Investing, Terminology | Comments Off

Table of Contents

ETF 101: Reviewing the Basics
What Is a Bond?
Types of Bonds
Benefits of Bond ETFs
Downsides of Bond ETFs
The Takeaway
FAQ

Investing in individual bonds can be complicated, but exchange-traded funds (ETFs) that invest in bonds — or bond ETFs — can provide a more straightforward way to invest in fixed-income securities. Investors may associate ETFs with stocks, thanks to the popular ETFs that track stock indices like the S&P 500. ETFs also happen to trade on stock exchanges, like the New York Stock Exchange.

Bond ETFs work similarly. Though the ETF holds bonds and not stocks, it trades on a stock exchange. Said another way, a bond ETF is a bundle of bonds that an investor can trade like a stock. Bond ETFs make it possible for investors to buy a diversified set of bonds, without the time and effort it would take to build a portfolio of individual bonds.

Key Points

• Bond ETFs give investors access to multiple bonds with smaller investments, enhancing diversification.

• Bond ETFs trade on stock exchanges, offering accessibility and liquidity.

• Types of bond ETFs include Treasury, municipal, corporate, and asset-backed bonds.

• Risks involve real-time price changes and potential loss of value.

• The real-time fluctuations of bond ETFs can lead to impulsive investor decisions.

ETF 101: Reviewing the Basics

Before getting into the specifics of bond ETFs, it will be helpful to understand ETFs and bonds separately. Let’s begin with ETFs.

An investment fund provides a way to pool money with other investors so that money can then be spread across many different investments (sometimes referred to as a “basket” of investments).

For most retail investors, it would be too costly to individually purchase 500 individual stocks or 1,000 individual bonds. But such a thing becomes possible when doing it alongside thousands of other investors. Though different vehicles, mutual funds and ETFs provide investors with an incredible opportunity to diversify their investments.

For retail investors, investment funds come in two major varieties: mutual funds and exchange-traded funds. Mutual funds and ETFs are constructed differently — ETFs were built to trade on an exchange, as the name implies — but both can be useful tools in gaining broad diversification.

Whether investors will choose a mutual fund or ETF will likely depend on their preference, and context. For example, someone using a workplace retirement plan may only have access to mutual funds, so that’s what they use.

Someone who is investing independently may choose ETFs since ETFs tend to have lower fees than mutual funds.

Whether an investor is using a mutual fund or an ETF, what’s most important is what’s held inside that fund. Think of an ETF as a basket that holds an array of securities, like stocks or bonds.

Most ETFs will hold just one type of security — only stocks or only bonds, for example. A bond ETF could be broad, or it could contain a narrower sliver of the bond market, like corporate bonds, green bonds, or short-term treasury bonds.

What Is a Bond?

Effectively, a bond is a loan to an organization: i.e., a company, government, or other entity. Investors loan the entity their money, and then the entity pays interest on the amount of that loan.

Bonds are different from stocks, which offer investors the opportunity to buy shares of ownership in a company in a company or entity.

There are many types of bonds. Treasuries are loans to the U.S. government. Municipal bonds are loans to a state or local government. Companies sometimes issue bonds in order to raise money. These entities are borrowing money from investors and issuing IOUs in the form of bonds.

How Bonds Work

When investors buy a bond, they are agreeing to the rate of interest and other terms set by the bond. Because bonds pay a fixed rate of interest, bonds are sometimes referred to as fixed-income investments.

Bonds typically make interest payments, sometimes referred to as coupon payments, twice annually.

Example of a Bond

Let’s say an investor buys a Company X bond for $10,000 that pays a 4% rate of interest over 20 years. The bond earns $400 every year, earning the investor a total of $8,000 over the 20-year period. At the end of the period, the $10,000 “principal” investment is returned. As long as the investor holds the bond for the full 20 years, there should be no surprises.

Because bonds pay a fixed rate of return, their earnings potential is largely predictable. But there is limited upside on what can be earned on a bond. For this reason, bonds are considered to be a safer, less volatile complement to stock holdings, which have a higher potential for returns over time.

Types of Bonds

Bonds are issued by different entities and are often categorized by the issuer. There are four categories of bonds available to investors.

• Treasury bonds: Bonds issued by the U.S. government.

• Municipal bonds: Bonds issued by local governments or government agencies.

• Corporate bonds: Bonds issued by a public corporation.

• Mortgage and asset-backed bonds: Bonds that pass through the interest paid on a bundle of debts, such as a bundle of mortgages, student loans, car loans, or other financial assets.

There are also many subtypes within these broad categories.

When it comes to risk, the bond market comprises a wide range. Corporate, municipal, and asset-backed bonds are generally considered to be higher-risk than treasury bonds.

Whereas a business or even a municipal government could potentially “default” on a loan, it is highly unlikely that the U.S. government would go bankrupt. (As yet, the U.S. government has never defaulted on a treasury bond.)

Because they are considered low risk, U.S. treasury bonds typically pay less interest than the other bond types. This is an important trade-off to understand. Higher-risk investments should pay a higher rate of interest in order to compensate the investor for taking on that additional risk.

This is why it is possible to see bonds with high rates of interest issued by unstable governments or by highly speculative companies. These are often referred to simply as high-yield bonds or junk bonds.

Bonds can also vary by their maturity dates. It is possible to purchase bonds with a wide range of timelines, ranging from the very short (a few days) to the very long (30 years). Although it depends on the current state of interest rates, long-term bonds tend to pay more than short-term bonds. This should make intuitive sense; investors want to be compensated for locking their money up for longer periods.

Benefits of Bond ETFs

While bonds offer certain benefits to investors, including relatively low risk and predictable income, these instruments are complex. Owning and managing a portfolio of bonds requires experience and sophistication. This is where bond ETFs come in. In some ways, bond ETFs give retail investors easier access to the bond market.

Bond ETFs Can Be Purchased in Small Dollar Amounts

For some bonds, the starting price is $1,000. This can be prohibitive for small investors who don’t have $1,000 to start building their bond portfolio, let alone a diversified one.

Generally, ETFs are sold by the share, and the cost of one share varies by ETF. Some trading platforms allow for the purchase of partial shares, which allows investors to get started with as little as $1.

Bond ETFs Can Provide Diversification

It is possible to buy into a fund of hundreds or thousands of bonds using a bond ETF. This type of portfolio diversification would be otherwise impossible to achieve for small investors trying to build a bond portfolio on their own. ETFs make diversification a possibility, even at very small dollar amounts.

Bond ETFs are Typically Low-Cost

ETFs, by their nature, are low-cost. Because they are typically passive funds by style, the management fee embedded within the fund — called the expense ratio — is typically quite low. Compare this to an actively managed mutual fund of bonds, where the expense ratios can top 1%.

There’s another fee that investors will want to be aware of, called a trading cost or transaction fee. This is the cost of buying and selling ETFs (and stocks). These fees can be quite prohibitive for retail investors. Luckily, there are ways to buy ETFs without paying any trading or transaction fees.

Bond ETFs are Liquid

Individual bonds are not always easy to buy and sell. Said another way, they are not particularly liquid. Bonds do not trade on an open exchange, like stocks and ETFs. It is likely that an investor would need to involve a professional to broker the transaction.

ETFs, on the other hand, are very easy to sell. Most banks and trading platforms allow investors to do it themselves, online. This way, an investment can be sold quickly if needed.

💡 Quick Tip: Distributing your money across a range of assets — also known as diversification — can be beneficial for long-term investors. When you put your eggs in many baskets, it may be beneficial if a single asset class goes down.

Downsides of Bond ETFs

Bond ETFs do have their downsides, however.

Bond ETFs reveal underlying price changes in the bonds, which some investors may find disconcerting. Because yes, it is possible for bonds, and a bond ETF, to lose value.

When holding an individual bond or a portfolio of bonds, an investor is not provided minute-by-minute updates of the market value of that investment. In this way, a bond is like a house. There is no ticker sitting above anyone’s house that tells them the value of that property at any given time.

This is not the case with a bond ETF, where price changes can be felt in near real time. It will be important that investors are prepared for this. It is generally not wise to make a decision about long-term investments based on recent price gyrations, not just with stocks but with bonds, too.

The Takeaway

The first step is to research bond ETFs, as there are many kinds. Bond ETFs can be broad and cover a wide sample of the bond market, or they can be narrower. For example, it is possible to buy a long-term treasury bond ETF or a bond ETF that only holds certain municipal bonds.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

FAQ

What is a bond ETF?

A bond ETF is an exchange-traded fund that invests in, or is composed of, bonds, rather than stocks or other types of securities.

What are some examples of types of bonds?

There are numerous types of bonds, and some examples include Treasury bonds (or T-bills), municipal bonds, corporate bonds, and mortgage or asset-backed bonds.

What are some potential advantages to bond ETFs?

Potential advantages of bond ETFs include the fact that they can be purchased in small dollar amounts, they can help diversify a portfolio, and are relatively liquid. That doesn’t mean that there aren’t drawbacks, however.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

S&P 500 Index: The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. It is not an investment product, but a measure of U.S. equity performance. Historical performance of the S&P 500 Index does not guarantee similar results in the future. The historical return of the S&P 500 Index shown does not include the reinvestment of dividends or account for investment fees, expenses, or taxes, which would reduce actual returns.
Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

Mutual Funds (MFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or clicking the prospectus link on the fund's respective page at sofi.com. You may also contact customer service at: 1.855.456.7634. Please read the prospectus carefully prior to investing.Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risk, include the risk of loss. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

Fund Fees
If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

¹Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.

SOIN-Q225-131

Jun

2025

What Is a Gamma Squeeze?

By Samuel Becker | Financial Independence, Growing Wealth, invest, Investing | Comments Off

Editor's Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.

A gamma squeeze is a rapid stock price surge triggered by options hedging activity. Heavy call buying can force market makers to buy shares, which may push prices higher.

In general, a squeeze describes a situation where investors are pressured to make a move that they otherwise would not have made. In a short squeeze, short sellers are forced to buy shares to cover their short positions when prices rise, which can further drive up the price of the shares. In contrast, a gamma squeeze involves call option activity that triggers market makers to hedge their position, which can drive prices up. This feedback loop is distinct from short sellers covering losses.

This article digs into what a gamma squeeze is, what it has to do with options trading, and what it means for investors.

Overview of Options Trading

Here’s a quick recap of how options trading works. Options can be bought and sold, just like stocks. In short, they’re contracts that give purchasers the right (but not the obligation) to buy or sell an asset — i.e., the option to transact.

Options can be used to speculate on price changes. For example, if an options trader thinks the price of a stock is going to increase, they can purchase an options contract to put themselves in a position to profit if their prediction were to come true.

There are two basic types of options: call and put options. A call gives purchasers the right to buy an asset at a certain time or price, whereas a put gives them the right to sell it. Buying these types of options allows them to effectively bet on a stock, without outright owning it. Purchasers typically pay a “premium,” or the price of the contract.

Generally, if an investor thinks a stock’s price will increase, they buy calls. If they think it will decrease, they buy puts.

Recommended: Options Trading Terminology

Gamma Squeeze Definition

A gamma squeeze has to do with buying call options. Remember, purchasers buy calls when they think the price of a stock is going to increase. And as the price of that stock increases, so does the value of the call option. Now, when a stock’s price starts to increase, that can lead to more investors buying calls.

But on the other side of those calls are the traders or institutions that sold them — remember that options are a contract between two parties, so for an investor betting on a stock price’s increase, there’s another that’s betting that it’ll fall. They’re taking a “short” position, in other words.

“Market makers” — trading firms that sell call options — are typically the party on the other side of the trade. They’re essentially “short” those call options that investors in the market are buying. These market makers face a good amount of risk if the price of the underlying stock rises, so they typically will buy some shares of the stock to hedge some of that risk, which can help balance their overall exposure.Buying the shares also helps to ensure that they will be able to deliver the stock if they become “due,” or the investor exercises their call options.

However, if investors keep buying more and more calls, and the stock’s price increases, market makers need to buy more and more stock — increasing its price even further, and thus, creating a “squeeze.” The gains in share value increase market makers’ risk exposure, prompting additional hedging.

Part of this is also because the stock’s gains bring the options closer to the prices at which calls can be exercised.

Basically, the short positions held by some investors may allow a gamma squeeze to happen. And if a stock’s price rises instead of falls, the shorters’ need to start buying the stock, further increasing its price, creating the feedback loop mentioned earlier.

Recommended: Shorting a Stock Explained

What’s Gamma in Options?

Okay, so you may have a grasp on how a gamma squeeze can occur. But we still need to talk about what gamma is, and how it fits into the picture.

Gamma is actually just one of a handful of Greek letters (gamma, delta, theta, and vega) that options traders use to refer to their positions. In a nutshell, the Greeks help traders determine if they’re in a good position or not.

For now, we’ll just focus on delta and gamma. Gamma is actually determined by delta. Delta measures the change of an option’s price relative to the change in the underlying stock’s price. For instance, a delta of 0.3 would mean that the option’s price would go up $0.30 for every $1 increase in the underlying stock’s price.

Gamma measures the rate at which delta changes based on a stock price’s change. It’s sort of a delta of deltas. In other words, gamma can tell you how much an option’s delta will change when the underlying stock’s price changes. Another way to think of it: If an option is a car, its delta is its speed. Gamma, then, is its rate of acceleration.

When a gamma squeeze occurs, delta and gamma on options fluctuate, which may contribute to stock volatility and pressure certain market participants.

The Takeaway

When investors are making bullish bets on a stock, sometimes they use call options — contracts that allow them to buy a stock at a certain date in the future.

When brokers or market makers sell those call options to the investors, they buy shares of the underlying stock itself in order to try to offset the risk they’re exposing themselves to. This also helps them ensure they can deliver the shares if the options get exercised by the investor holding the call options.

Gamma squeezes may occur when market makers rapidly buy shares, contributing to a sudden increase in stock prices.

SoFi’s options trading platform offers qualified investors the flexibility to pursue income generation, manage risk, and use advanced trading strategies. Investors may buy put and call options or sell covered calls and cash-secured puts to speculate on the price movements of stocks, all through a simple, intuitive interface.

With SoFi Invest® online options trading, there are no contract fees and no commissions. Plus, SoFi offers educational support — including in-app coaching resources, real-time pricing, and other tools to help you make informed decisions, based on your tolerance for risk.

Explore SoFi’s user-friendly options trading platform.

FAQ

What happens during a gamma squeeze?

During a gamma squeeze, rapid buying of call options leads market makers to hedge their risk by buying the underlying stock. This buying activity can push the stock price higher, which may trigger further call option activity. This may create a feedback loop that drives additional volatility, accelerating a rise in price.

How long does a gamma squeeze last?

There is no set timeframe. A gamma squeeze can unfold over hours or days, depending on factors such as investor sentiment, trading volume, and how quickly market makers adjust their hedging strategies. They often end once demand for options eases or the stock stabilizes.

Is a gamma squeeze good?

It depends. For some investors, a gamma squeeze may present short-term opportunities if they’re positioned correctly. Volatility can also expose traders to significant risk, especially if prices move sharply in either direction without warning.

Has a gamma squeeze ever happened?

Yes. Several gamma squeezes have occurred, often tied to stocks with heavy options trading and high short interest. In certain cases, option activity has prompted market makers to rapidly buy shares to manage risk, which contributed to sharp price increases.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN-Q225-023

Jun

2025

Complete Guide to the Moving Average Convergence Divergence (MACD) indicator

What Is MACD?

By Colin Dodds | Financial Independence, Growing Wealth, invest, Investing | Comments Off

The moving average convergence divergence (MACD) is an indicator that shows the momentum in equity markets. It’s especially popular with traders, who use it to help them rapidly identify short-term momentum swings in a stock.

A moving average can help investors see past the noise of daily market movements to find securities trending up or down. The MACD offers another way to focus on such stocks, by showing the relationship between two moving averages.

Key Points

• Moving averages smooth price data, which may help investors identify trends and shifts in momentum.

• MACD calculates the difference between 26-day and 12-day moving averages.

• Positive MACD values indicate upward momentum; negative values suggest downward trends.

• Divergences show increasing momentum, while convergences signal potential overbought or oversold conditions.

• MACD’s lagging nature can lead to false signals in volatile markets.

Understanding the Moving Average

The moving average convergence divergence may sound complex, so it makes sense to start with the first part: the moving average (MA), also called the exponential moving average, or EMA. This is a very common metric with stocks, used to make sense of ever-fluctuating price data by replacing it with a regularly updated average price. This moving average can give investors a clearer idea of where a stock is trading than one that’s updated second by second.

Because the moving average reflects past prices, it is a lagging indicator. But how much the past prices factor in depends on the person setting the average. Most commonly, investors look at moving averages of 15, 20, 30, 50, 100, and 200 days, with the 50- and 200-day averages being the most widely used.

A moving average with a shorter time span will be more sensitive to price changes, while moving averages with longer time spans will fluctuate less dramatically. Generally, active traders with strategy focused on market-timing favor shorter-duration moving averages.

To perform the MACD calculation, traders take the 26-day moving average of a stock and subtract it from that stock’s 12-day moving average. This calculation offers a quick temperature-check of a stock’s momentum.

While the 12-day and 26-day time spans are standard for the MACD, investors can also create their own custom MACD measurements with time spans that better fit their own particular trading tactics and investment strategies.

💡 Quick Tip: Before opening any investment account, consider what level of risk you are comfortable with. If you’re not sure, start with more conservative investments, and then adjust your portfolio as you learn more.

How to Read MACD

If a stock’s MACD is positive, that means its short-term average is higher than its long-term average, which could be a bullish indicator that stock is on an upswing. A higher MACD indicates more pronounced momentum in that upswing. Conversely, a negative MACD indicates that a stock is trending downward.

If the positive or negative difference between the shorter-term and longer-term moving averages expands, that’s considered the MACD divergence, or the “D” in MACD. If they get closer, that’s considered a convergence, the “C” in MACD.

When the two moving averages converge, they meet at a place between the positive and negative MACD, called the zero line, or the centerline. For many traders, this MACD crossover is the sign they wait for to jump into a stock, which after losing value, is suddenly gaining value. Conversely, a stock crossing the zero line of the MACD is often taken to mean that the good times are over, leading many traders to sell at that point.

The MACD is a vital concept in technical analysis, a popular approach investors use to try to forecast the ways a stock might perform based on its current data and past movements. It involves a wide range of data and trend indicators, such as a stock’s price and trading volume, to locate opportunities and risks.

Technical analysis does not look at underlying companies, their industries, or any macroeconomic trends that might drive their success or failure. Rather, it solely analyzes the stock’s performance to find patterns and trends.

Recommended: The Pros and Cons of Momentum Trading

The MACD as a Trading Indicator

For traders, a rising MACD is a sign that a stock is being bid up. The MACD shows how quickly that’s happening.

As the short-term average rises above the longer-term average, and the two figures diverge more widely, the MACD expresses this in a simple number. When a stock is sinking, investors also want to know how fast it’s falling, as well as whether its decline is speeding up or slowing down, which they can find quickly by looking at the divergence.

A convergence is also a key indicator for many traders. As the long-term and short-term moving averages get closer to one another, it can be a sign that a given stock is either overbought or oversold for the moment. If they hold the stock, it may be time to sell the stock. But if they like the stock, and are waiting for a bargain-basement price at which to buy it, then the convergence of the two averages on the zero line may mean it’s time to start buying.

By using the MACD, traders can also compare a stock to competitors in its sector, and to the broader market, to decide whether its current price reflects its value and whether they should buy, sell, or short a stock.

Because the MACD is priced out in dollars, many traders will use the percentage price oscillator, or PPO. It uses the same calculation as the MACD, but delivers its results in the form of a percentage difference between the shorter- and longer-term moving averages. As such, it allows for quicker, cleaner comparisons.

💡 Quick Tip: How to manage potential risk factors in a self directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

The Pros and Cons of the MACD

The MACD indicator has benefits for traders. It’s a convenient gauge of a stock’s momentum for an active, short-term trader. But it can also help a long-term investor who’s looking for the right moment to buy or sell a stock. Once an investor understands the MACD, it’s an easily interpreted data point to incorporate into their trading strategy.

But the MACD does have its drawbacks and does not account for certain types of investment risk. Because the MACD is a lagging indicator, it can lead to a trader staying too long in a position that’s since begun to swoon. Or, alternately, it can indicate a turnaround that’s already run the bulk of its course.

This is especially dangerous in volatile markets, when stocks can “whipsaw.” This term – named for the push-and-pull of the saw when it’s used to chop down a tree – describes the phenomenon of a stock whose price is moving in one direction, and suddenly goes sharply in the opposite direction. Whether that whipsaw movement is up or down, it can prove highly disruptive for a trader who relies too heavily on the MACD.

The Takeaway

The MACD can be a helpful metric for traders to understand and to use, in conjunction with other tools to help formulate their investing strategy. The MACD indicator has benefits for traders. It’s a convenient gauge of a stock’s momentum for active traders.

But it can also help long-term investors, too, determine when to buy and sell. It’s also a lagging indicator, which can make it tricky to use for inexperienced traders. As always, it’s best to consult with a financial professional if you’re feeling like you’re in over your head.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

FAQ

What does MACD stand for?

In investing, MACD stands for “moving average convergence divergence,” and it is an indicator that shows momentum in equity markets.

What does MACD signal for stock traders?

MACD is an indicator that can be used by traders or investors to signal that a stock is being bid up, and it can give them an idea of how quickly that is occurring.

Can MACD be used by long-term traders?

Yes, though MACD is an indicator typically used by short-term or day-traders, long-term traders may use it to get a sense of the best time to purchase a security.

Photo credit: iStock/visualspace

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN-Q225-133

Jun

2025

What Are Hedge Funds and How Do They Work?

By Laurel Tincher | Financial Independence, Growing Wealth, invest, Investing | Comments Off

A hedge fund is a private fund, often not registered with the SEC, which invests in publicly traded securities and other assets with the aim of delivering higher-than-average returns.

Hedge funds are pooled investment funds, similar to mutual funds, but they are typically accessible only to high-net-worth, accredited, or institutional investors. They are not available to retail investors. Hedge funds have high investment minimums, often in the millions, and they rely on high-risk strategies with significant fees.

Unlike registered investment companies and open-end funds, hedge funds don’t have to follow regulations that govern most mutual funds and ETFs, including restrictions on the use of leverage, disclosure requirements around asset value and share pricing, and more.

In short, while hedge fund returns can be high, losses can be just as steep, and investors who qualify to invest in these vehicles need to understand the risks involved.

Key Points

• Hedge funds are similar to mutual funds and ETFs in that they are a type of pooled investment fund, but they are private funds not open to retail investors.

• Unlike most mutual funds and ETFs, hedge funds employ high-risk strategies to achieve higher-than-average returns.

• Owing to their potential to deliver big profits, hedge funds charge significant fees and require high investment minimums.

• While some hedge fund managers must register with the SEC, many hedge funds are unregistered, and are not subject to certain regulations — one of the reasons retail investors typically don’t have access to these funds.

• While hedge fund returns may be high, so is the potential for steep losses.

What Is a Hedge Fund?

Hedge funds are set up by a registered investment advisor or money manager, often as a limited liability company (LLC) or a limited partnership (LP). They differ from mutual funds in that they have more investment freedom — meaning, they’re not subject to standard SEC regulations — so they’re able to make riskier investments.

How Hedge Funds Work

By using aggressive investing tactics, such as short-selling, leverage, and alternative investment strategies, hedge funds can potentially deliver higher-than-market returns. But they also come with higher risks than other types of investments.

In addition to traditional asset classes, hedge funds can include a diverse array of alternative assets, including art, real estate, and currencies.

Hedge funds tend to seek out short-term investments rather than long-term investments. Of course assets that have significant short-term growth potential can also have greater short-term losses.

Historically, hedge funds have not performed as well as somewhat safer investments, such as index funds. However, investors also use hedge funds to provide growth during all phases of market growth and decline, providing diversification to a portfolio that also contains stocks, cash, and other investments.

Generally speaking, only qualified investors and institutional investors are able to invest in hedge funds, due to their risks and the high fees that get paid to fund managers — typically 20% of profits. In addition, the redemption rules around hedge funds — including a typical one-year lock-up period — can be complex as well as costly.

Types of Hedge Funds

Each hedge fund has a different investing philosophy and invests in different types of assets. Some different hedge fund strategies include:

• Real estate investing

• Junk bond investing

• Specialized asset class investing such as art, music, or patents

• Long-only equity investing (no short selling)

• Private equity investing, in which the fund only invests in privately-held businesses. In some cases the hedge fund gets involved in the business operations and helps to take the company public.

What Is a Hedge Fund Manager?

Hedge funds are run by investment managers who manage the fund’s investment strategy. If a hedge fund is profitable, the hedge fund manager can make a significant amount of money, often up to 20% of the profits.

Before selecting and investing in a hedge fund, it’s important to look into the fund manager’s history as well as their investing strategy and fees. This information can be found on the manager’s Form ADV, which you can find on the fund’s website as well as through the Security and Exchange Commission’s (SEC) website.

Who Can Invest in a Hedge Fund?

Hedge funds are not open to retail investors, who can buy stocks online, and there are several requirements to be able to invest in hedge funds.

In order for an individual to invest, they must be an accredited investor. This means that they either:

• Have an individual annual income of $200,000 or more. If married, investors must have a combined income of $300,000 per year or more. They must have had this level of income for at least two consecutive years and expect to continue to earn this level of income.

• Or, the investor must have an individual or combined net worth of $1 million or more, excluding their primary residence.

If the investor is an entity rather than an individual, they must:

• Be a trust with a net worth of at least $5 million. The trust can’t have been formed solely for the purpose of investing, and must be run by a “sophisticated” investor, defined by the SEC as someone with sufficient knowledge and experience with investing and the potential risks involved.

• Or, the entity can be a group of accredited investors.

How to Invest in a Hedge Fund

Investing in hedge funds is risky and involves a deep understanding of financial markets. Before investing, there are several things to consider:

The Fund’s Investing Strategy

Start by researching the hedge fund manager and their history in the industry. Look at the types of assets the fund invests in, read the fund’s prospectus and other materials to understand the opportunity cost and risk. Generally speaking, the higher the risk, the higher potential returns.

In addition, you need to understand how the fund evaluates potential investments. If the fund invests in alternative assets, these may be difficult to value and may also have lower liquidity.

Understand the Minimums

Investment requirements can range between $100,000 to $2 million or more. Hedge funds have less liquidity than stocks or bonds, and it’s also common for there to be lock-up periods for funds — and/or for there to only be certain times of year when funds can be withdrawn.

Confirm You Can Make the Investment

Make sure that the fund you’re interested in is an open fund, meaning that it accepts new investors. Financial professionals can help with this research process. Each hedge fund will evaluate an individual’s accreditation status using their own methods. They may require personal information about income, debt, and assets.

Understand the Fees

Usually hedge funds charge an asset management fee of 1-2% of invested assets, as well as a performance fee of 20% of the hedge fund’s profits.

The Takeaway

Hedge funds offer accredited and institutional investors the chance to invest in funds that are usually high-risk, but offer high potential returns. There are many rules surrounding hedge funds, and many investors may not even consider them as a part of an investing strategy.

For accredited investors, investing in a hedge fund may be one part of a diversified portfolio, although it depends on the investor’s risk tolerance, time horizon, and investing goals. If you’re not an accredited investor, or you’re worried about the risks associated with hedge funds, it may make more sense for you to consider other types of investments or to stick with ETFs, mutual funds, or funds of funds that emulate hedge fund strategies.

Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.

Invest in alts to take your portfolio beyond stocks and bonds.

FAQ

What is a hedge fund in simple terms?

A hedge fund is a loosely regulated pooled investment fund that employs high-risk strategies in order to deliver returns.

How do you make money from a hedge fund?

Hedge funds typically invest in high-risk assets in order to deliver better-than-market returns. But there are no guarantees, and the combination of risk and high fees can lead to steeper-than-average losses.

How rich do you have to be to invest in a hedge fund?

Current SEC regulations require that most hedge funds accept only accredited investors, i.e., individuals with a net worth of $1 million or more, excluding their primary residence. In addition, minimum investment levels can start in the millions.

Photo credit: iStock/gece33

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.

Fund Fees
If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.

Mutual Funds (MFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or clicking the prospectus link on the fund's respective page at sofi.com. You may also contact customer service at: 1.855.456.7634. Please read the prospectus carefully prior to investing.Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risk, include the risk of loss. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIN-Q225-050

Trading Halts vs Other Trading Restrictions

What Is the Difference Between a Trading Halt and a Trading Restriction?

What Is a Trading Halt or Delay?

Reasons for Trading Halts

1. Anticipation of a Major News Announcement

2. Severe Price Fluctuations

3. Market-Wide Circuit Breakers

4. Correct an Order Imbalance

5. Technical Glitch

6. Regulatory Concerns

How Long Do Trading Halts Last?

Example of Trading Halts

Pending News

Stock Volatility

Technical Issues

Market-wide Circuit Breakers (MWCBs)

The Takeaway

FAQ

Is a trading halt a good thing?

What happens when trading is halted?

What’s the difference between a halt and a suspension?

Bond ETFs Explained

ETF 101: Reviewing the Basics

What Is a Bond?

How Bonds Work

Example of a Bond

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Types of Bonds

Benefits of Bond ETFs

Bond ETFs Can Be Purchased in Small Dollar Amounts

Bond ETFs Can Provide Diversification

Bond ETFs are Typically Low-Cost

Bond ETFs are Liquid

Downsides of Bond ETFs

The Takeaway

FAQ

What is a bond ETF?

What are some examples of types of bonds?

What are some potential advantages to bond ETFs?

What Is a Gamma Squeeze?

Overview of Options Trading

Gamma Squeeze Definition

What’s Gamma in Options?

The Takeaway

FAQ

What happens during a gamma squeeze?

How long does a gamma squeeze last?

Is a gamma squeeze good?

Has a gamma squeeze ever happened?

What Is MACD?

Understanding the Moving Average

How to Read MACD

The MACD as a Trading Indicator

The Pros and Cons of the MACD

The Takeaway

FAQ

What does MACD stand for?

What does MACD signal for stock traders?

Can MACD be used by long-term traders?

What Are Hedge Funds and How Do They Work?

What Is a Hedge Fund?

How Hedge Funds Work

Types of Hedge Funds

What Is a Hedge Fund Manager?

Who Can Invest in a Hedge Fund?

How to Invest in a Hedge Fund

The Fund’s Investing Strategy

Understand the Minimums

Confirm You Can Make the Investment

Understand the Fees

The Takeaway

FAQ

What is a hedge fund in simple terms?

How do you make money from a hedge fund?

How rich do you have to be to invest in a hedge fund?

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