CNBCs Jim Cramer said on Wednesday that trading meme stocks is more gambling than investing.
“It’s exciting. It’s fun and it’s real,” Cramer continued “Squawk Box.” However, he added, “If you want to play it, I don’t know, you can go to the casino. These should be offered at the casino.” He wondered, “Why are they being offered on the New York Stock Exchange?”
The “Bad money” The host’s comments came as shares of the new Reddit goal Clover health rose again in the premarket on Wednesday, rising nearly 30% at the opening, extending the recent wild ride for the insurance company offering Medicare Advantage plans. However, excitement waned in early trading and Clover turned negative during the session. At the daily lows, Clover stock has still more than doubled since trading closed of $ 9 on Friday.
The Reddit trading frenzy that started in January GameStop as its most prominent destination has come back into focus lately. AMC entertainment, in particular has was a favorite of Reddit traders. Other meme stocks that have received varying amounts of interest include: Bed bath in addition and blackberry – and a new Wednesday, Clean energy fuelswhich has increased by about 20%.
Reddit traders have drawn to stocks with above-average short positions, creating the potential for what is known as a short squeeze when stocks are pushed up. Selling short is a bearish strategy that allows investors to take advantage of a stock’s falling price.
“You do everything … you have to try to find out which one is next,” said Cramer, who … previously criticized short sellers who are still betting against GameStop and AMC.
Interactive brokers Founder and Chairman Thomas Peterffy on Monday also warned shorts about the risks of participating in meme stocks and saying they can reach “unimaginable heights” before returning to Earth. But he added that in the meantime, traders may have to cover their bets with big losses.
While newcomers to the stock market are welcome, Cramer hopes young people will focus on investing based on fundamentals. He rejected the idea that the best way to learn about the markets is to get involved in trades.
“We have young people coming into the market. We have 10 million people and Reddit. You need to be educated. That’s the solution, ”said Cramer. “I know it’s old fashioned, but I think it would really help because I know some people think a lot of money has to be lost. I like it when people make money as long as they understand it’s not a game. “