“MOASS,” or, the “Mother of All Short Squeezes,” was largely unknown to investors prior to 2021. But a saga involving so-called “meme stocks,” most notably GameStop stock, changed that, and MOASS entered the investing lexicon. In short, that specific scenario, bringing the Mother of All Short Squeezes, as a strategy, to investors’ attention, involved a rag-tag band of day traders taking on the hedge fund giants, with a short-sale “squeeze” that greatly impacted some of those giants.
Meme stocks, including GameStop and AMC Theatres, saw further short squeeze action in mid-May 2024, too. But the episode in 2021 shined 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 can lead to significant profits for traders who initiate the squeeze.
• The approach carries high risks, especially for those who join late or cannot sell off at peak prices.
Table of Contents
Short Squeeze Basics
A short squeeze is an orchestrated effort to drive up shares of a stock that’s being heavily shorted. MOASS, meaning the Mother of All Short Squeezes, as noted, is a trading strategy in which a high volume of buyers drive up shares of stocks that were being “shorted” by other investors.
A short squeeze trading strategy needs two components to work — a short seller or, more preferably, several short sellers on one side and a group of disciplined contrarian investors who unroll a short squeeze and buy shares of the stock being shorted.
💡 Quick Tip: Investment fees are assessed in different ways, including trading costs, account management fees, and possibly broker commissions. When you set up an investment account, be sure to get the exact breakdown of your “all-in costs” so you know what you’re paying.
How the MOASS Works
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, when the stock price falls, a short seller buys the stock at the reduced price, returns the shares, and pockets the profit.
If the short seller makes the right call, meaning the price does fall, they earn the difference between the price when they entered the short position and the lower stock price at which they bought to cover.
If the short seller makes the wrong call, and the price goes up, the investor must buy the stock at a price higher than when they entered the short position, thereby losing money — and negating any potential for a profit.
As short sellers wind up leaving their short positions when they execute a buy order on the stock, those “short-squeeze” buy positions get noticed by other day traders, who also jump in to purchase the stock. That, in turn, drives the stock’s price even higher, since there are fewer shares of the stocks available to purchase.
Short-sellers, highly alarmed by the rising share price, also issue buy orders on the stock to exit the short sale strategy and reduce their investment risk, which completes the cycle and puts the short squeeze in full effect. This can result in the short sales losing money and the MOASS day traders making a profit on the rising stock price.
Recommended: Understanding Low Float Stocks
Get up to $1,000 in stock when you fund a new Active Invest account.*
Access stock trading, options, auto investing, IRAs, and more. Get started in just a few minutes.
GameStop: The Prime Example of MOASS
Perhaps the best example of MOASS in action is the GameStop saga 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, like GameStop, had been heavily affected by the pandemic at the time.
But GameStop shares bucked the trend.
A group of day traders hanging out on a Reddit investing forum called “Wallstreetbets” banded together and started buying up shares of GameStop stock. The gambit worked, with GameStop shares skyrocketing from $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 sales positions, will have to sell their shares and cut their losses, thereby driving the stock price even higher. That rewards the short squeeze investor, who profits 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 making huge profits 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.
Recommended: Pros and Cons of Momentum Trading
MOASS Trading Tips
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 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, tamp down emotions by limiting the amount of money you invest in a GameStop-type situation. As the old gambling adage says, never risk money you can’t afford to lose. That goes double when chasing the thrill of a MOASS scenario.
Should You Expect to Lose Money?
There’s a significant chance that you’ll lose money at some point with a short squeeze play.
Nothing is guaranteed in the stock market and that’s especially the case as short-sellers have learned their lesson after meme-stock related events in recent years, and grow more cautious about their investing habits. MOASS trading patterns can be something of a roller coaster ride for investors, and the odds that your ride will dip along the way are high. That can translate into days or even weeks of your short-squeeze buying strategy where your investment returns are written in red ink.
💡 Quick Tip: Are self-directed brokerage accounts cost efficient? They can be, because they offer the convenience of being able to buy stocks online without using a traditional full-service broker (and the typical broker fees).
MOASS Tip: Have a Plan to Sell Quickly
Short squeeze investing isn’t exactly an orderly process and you need to put your interest first ahead of other MOASS investors. Why? Because 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 be a good idea in this scenario.
If you buy a targeted MOASS stock at $50 and it goes to $70, there’s no way of knowing if the stock will go any higher — it might and 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, can help minimize investment losses and capitalize on a stock increase when and if it happens.
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 portfolio-shaking volatility to the investment table, and there are plenty of heavily shorted stocks that could be the next MOASS, but it’s impossible to know which one could trigger a squeeze.
That means MOASS may not be the best strategy for long-term investors or those with an aversion to risk. A short squeeze takes a significant amount of discipline, patience, and attention on the part of the investors, with continual risk in play until the squeeze is played out.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.
Photo credit: iStock/PeopleImages
SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below:
Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
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.
Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.
SOIN-Q224-1885888-V1
Source: sofi.com