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“MOASS,” or the “Mother of All Short Squeezes,” was largely unknown to investors prior to 2021. But a market event involving so-called “meme stocks,” most notably GameStop stock, changed that, and MOASS entered the investing lexicon. That specific scenario brought the Mother of All Short Squeezes as a strategy to investors’ attention and involved a band of day traders taking on the hedge fund giants with a short sale “squeeze” that greatly impacted the markets.
Meme stocks, including GameStop and AMC Theatres, saw further short squeeze action in mid-May 2024, too. But the episode in 2021 shone a light on investors, short sales, trading squeeze strategies, and digital trading on a massive scale, all of which fell under the MOASS umbrella.
Key Points
• MOASS stands for “Mother of All Short Squeezes,” a phenomenon where stock prices skyrocket due to mass buying.
• It gained prominence with the GameStop stock saga, where day traders challenged large hedge funds.
• The strategy involves a high volume of purchases to drive up stock prices, countering short sellers.
• Effective execution of MOASS could potentially lead to significant profits or losses for traders who initiate the squeeze.
• The approach carries high risks, especially for those who join late or can’t sell off at peak prices.
Short Squeeze Basics
In order to understand how a short squeeze or a massive short squeeze works, you first need to understand short selling.
Short sellers aim to profit from the fall in a stock’s price. They do so by borrowing and selling shares of a stock that they believe will decline in value. Then, if the stock price falls, a short seller can buy the stock at the reduced price, return the shares, and pocket the profit.
If the short seller makes the right call, meaning the price does fall, they can earn the difference between the price when they entered the short position and the lower stock price at which they bought to cover, minus any fees.
If the short seller makes the wrong call, and the price goes up, they must buy the stock at a price higher than when they entered the short position, thereby losing money.
In a short squeeze, there’s a rapid increase in the price of a stock that’s being heavily shorted by investors. Short sellers may then scramble to buy back shares to exit their short positions, which may then fuel a wave of buying demand. This can trigger a dramatic feedback loop: as stock purchases push the stock price even higher, it may force even more short sellers to buy, causing the price to skyrocket.
How a MOASS Works
MOASS, meaning the Mother of All Short Squeezes, is a viral marketing event where a short squeeze reaches a massive scale. A MOASS generally needs two components to work: a stock that has exceptionally high interest from short sellers relative to the total shares available and investors who buy shares of the stock being shorted.
In a theoretical example of a MOASS, purchases of stock by day traders could get noticed by other day traders, who also jump in to purchase the stock. That, in turn, could drive the stock’s price even higher since there are fewer shares of the stock available to purchase.
Short sellers, alarmed by the rising share price, may also issue buy orders on the stock to exit the short sale strategy and reduce their investment risk, which can essentially put the short squeeze cycle into full effect. This may result in the short sellers losing money and the day traders who purchased shares making a profit on the rising stock price.
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GameStop: The Prime Example of MOASS
Perhaps the best example of MOASS in action is the GameStop saga, which occurred in early 2021. At the time, several hedge fund firms had “shorted” GameStop stock, which essentially meant betting the share price of the stock would decline. That didn’t happen with GameStop shares. Some context is important to understand, too, as many retail stocks, such as GameStop, had been heavily affected by the pandemic at the time.
But GameStop shares bucked the trend.
A group of day traders on a Reddit investing forum called “WallStreetBets” banded together and started buying up shares of GameStop stock. As a result, GameStop shares skyrocketed from about $19 per share to around $350 per share. The retail investors had successfully “squeezed” the short sellers, causing several hedge funds to lose hundreds of millions of dollars on their short positions on GameStop.
If the short squeeze works, the share price will continue to rise, and the short investors, many of whom have fixed deadlines built into their short sale positions, may have to repurchase their shares and cut their losses, thereby driving the stock price even higher. That rewards the short squeeze investor, who may profit from the rising share price, especially as other buyers enter the fray and drive the share price up even higher.
Once victory was declared with the GameStop short squeeze, the Reddit traders turned their attention to other so-called meme stocks where short selling activity was particularly high. That group included AMC Entertainment Holdings, Koss Corporation, and BlackBerry, which all saw share volumes rise after the MOASS traders entered the fray.
Thus, a series of short squeezes that target more and more short sellers is really what MOASS is all about: squeezing enough short sellers to achieve critical mass in the trading markets and attempting to profit in the process.
Also, as mentioned, a similar situation played out in May 2024, when certain stocks (including GameStop and AMC Theatres) were at the center of another short squeeze, though smaller in scale than the 2021 events.
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MOASS Trading
Investors who want to participate in the next short squeeze effort should be careful. So-called “meme” stock trading can be fraught with risk, especially if you’re left holding the bag after other short squeezers sell out of their positions before you do.
Take these risk considerations with you before participating in a potential mass short squeeze play.
Consider Minimal Purchases to Limit Losses
While the adrenaline level can be high when participating in a short squeeze trading event, stock traders may avoid emotionally driven investing by limiting the amount of money they invest in a potential short squeeze event. As the old adage goes, never risk money you can’t afford to lose. That goes double when chasing the thrill of a highly risky GameStop-type scenario.
Should You Expect to Lose Money?
There’s a significant chance of losing money with a short squeeze play.
Nothing is guaranteed in the stock market, and that can especially be the case with meme-stock-related events that can experience extreme volatility. Meanwhile, the fundamental value of the stock in question may not be in line with its hype-driven price.
MOASS trading patterns can be something of a roller coaster ride for investors, and the odds that the ride will dip along the way are high, meaning caution is warranted when a massive short squeeze may be occurring.
MOASS Strategy: Have a Plan to Sell Quickly
Investors involved in a short squeeze or massive short squeeze should be aware that stock volatility can be high, and prices can swing at a moment’s notice when trading MOASS-themed stocks. Additionally, nobody really has any idea how high a price can go with a short squeeze in play, and nobody really knows if a stock will rise higher at all.
That’s why it’s a good idea to have a fixed “sell price” in mind when engaging in a short squeeze situation. A stop loss order to automatically sell the stock at a specific price can also be a good idea in this scenario.
If you buy a targeted MOASS stock at $50 and it increases to $70, there’s no way of knowing if the stock will go any higher — it might or it might not. Worse, the price could slide back to $30 when buyers lose interest in the stock.
Having a good investment exit strategy in a short squeeze scenario may help protect against investment losses if a MOASS does occur.
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The Takeaway
“MOASS” means the “Mother of All Short Squeezes,” and perhaps the best example of it in action involved so-called “meme stocks” in 2021. Short squeeze trading strategies can bring a great deal of volatility to the investment table. While there are a number of heavily shorted stocks on the market, it’s impossible to know which one could trigger a squeeze. What’s more, while it’s helpful to know that larger short squeeze events may occur, MOASS events are exceptionally rare and carry substantial speculative risk.
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FAQ
What does MOASS mean?
MOASS is an abbreviation of “Mother of All Short Squeezes.” It’s when many investors participate in squeezing a heavily shorted stock. The term became popular in 2021 when day traders on Reddit came together to buy shares in GameStop stock, triggering a massive squeeze on institutional traders holding the opposite position.
What is a short squeeze?
A short squeeze is when a heavily shorted stock’s price increases quickly due to a sudden surge in buy orders. Short sellers make money when a stock’s price goes down, so the unexpected price increase often pressures them to buy back shares to limit their losses. When they do so, they help increase the buying pressure (which forces other short sellers to buy shares), creating a cycle that pushes the stock’s price higher and higher.
What is a short sell?
Short selling is when a trader borrows shares of a stock and sells them, hoping to buy them back later at a lower price. If the stock price falls, the investor can buy back the now cheaper shares, pocket the difference, and return the shares to the lender. However, if the price rises, they’ll lose money instead.
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