What Exactly Are Stonks?

What Exactly Are Stonks?

The phrase “stonks” is a deliberate misspelling of the word “stocks” and is frequently used to mock a specific stock or the stock market in general. Stonks gained popularity in early 2021 amid the boom of the GameStop stock at the hands of Reddit users.

Learn about the origins of stonks, how the term came to be so commonly used and recognized, and what stock market pros, especially Elon Musk, think about the term.

Stonks: Definition and Example

The slang term “stonks” is a deliberate misspelling of the word “stocks.” It’s frequently used to mock the stock market, particularly large gains or losses. According to the website Know Your Meme, the term was first used in a stock market meme on the internet in 2017.

J.J. Wenrich, a certified financial planner (CFP) and author of the book “Teaching Kids to Buy Stocks,” told The Balance via email, “Stonks is merely a silly, often sarcastic way of saying/spelling stocks.”

The Stonks meme has been going around since 2017, gradually growing in popularity due to a few important spotlights. In a June 2019 tweet, Elon Musk, for example, used a variation of the Stonks joke. When asked about Tesla’s soaring stock price in June 2020, Musk answered with a tweet that simply wrote: Stonks.

What is Stonks and How Does It Work?

You’ve likely heard the term stonks in regard to the GameStop rush if you’ve followed any of the news coverage—or, more crucially, the social media commentary—about it.

The Stonks meme gained traction in early 2021 when regular investors came together to oppose a hedge fund’s short position on GameStop shares.

The hedge fund bet on a drop in GameStop’s stock price by shorting the stock. The stock chart, which had been a rather flat line progressively going lower over the previous year, suddenly rocketed up astronomically when individual investors, prompted by the Reddit page WallStreetBets, began buying. The increase in the stock price damaged the hedge fund’s chances of making a successful short. As the buzz developed, additional investors jumped in, many of whom used the famous investment app Robinhood.

The whole thing came to a halt after regulatory scrutiny and Robinhood briefly halted GameStop trades, but the frantic trading is a good example of stonks. Between the first trading day in January 2016 and the first trading day in January 2021, GameStop’s stock averaged $19.54 per share, with the maximum trading price of $33.70 in April 2016. GameStop’s stock reached a high of $483.4 on Jan. 28, 2021.

The GameStop incident received a lot of attention, and it was probably several people’s first exposure to the stock market. A study undertaken by asset management firm Hartford Funds to evaluate investor mood following the GameStop spike indicated that 25% of respondents had raised their interest in the stock market as a result of the incident, while 13% had already increased their stock market engagement.

It’s likely to be associated with stocks that have sparked public interest or excitement in the future. However, most consumers should avoid the GameStop approach to investing, according to experts.

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