loader image

Institutional Trade or Social Media Pump and Dump: Know the Difference

by | Dec 9, 2021

One of my favorite things about the Daily Profits Challenge War Room — aside from the fantastic profits — is being able  to respond to everything in real time, especially member questions. 

The markets are the same as any other subject… When you’ve spent years passionately learning and practicing a skill or craft like trading, it’s easy to take a lot of the early lessons for granted. 

And when it comes to trading for newbies, there aren’t many stupid questions…

My objective here at New Money Crew and in my different strategies isn’t just to give you actionable trade ideas — I also want to help bridge the knowledge gap with big institutions and tilt the table back towards everyday traders. I had a mentor when I first started out, and I want to be that for my readers and viewers.

There’s no question too big or too small… Because even questions that seem small can have a bigger impact than we might first think. 

One of those questions popped up as I was breaking down the pros and cons of a big trade in Jumia Technologies AG (NYSE: JMIA) during Wednesday’s live session. The big factor that gives the trade upside potential also comes with its fair share of risk — it’s most likely a social media pump and dump. 

The Rise of the Retail Trader and the Social Media Pump and Dump

Normally, after calling a trade a likely social media pump and dump, I would have just moved on and assumed everyone in the room was on the same page. But thankfully, one trader spoke up and asked a deceptively simple question… 

“Lance, what’s a pump and dump?” 

I call it deceptive because answering it meant taking a much wider look at the state of the options market and how it works. 

What used to be the sole domain of the whales and major trading institutions has become a playground for a brash new generation of degenerate options traders. 

With more and more retail traders using social media, we’re seeing increased pump-and-dump activity in the options markets on smaller companies — especially if they have high short interest. 

Stocks like Jumia and Tilray Inc. (Nasdaq: TLRY) are sensitive enough that groups of small traders can put pressure on the underlying stock and the options premiums. And it’s becoming more difficult to figure out what is real  institutional order flow and what is not.

The good news with pump and dump trades is that they can move. The bad news is they can be illiquid and more difficult to exit for a profit.

So being able to tell which is which means traders can better understand the risk they’re taking, and improve their chances of bagging a winning trade.  

Check out the quick video to hear my thoughts on this trade and the social media pump and dump.

Don’t forget you can follow me @LanceIppolito on Twitter, Instagram and our YouTube channel for more trading insights and tips. And as always, you can find me right here talking stocks and options trading — and printing money — on WealthPress.com! And keep your eyes on the Blitz Daily because the next monster gain could hit at any time!  


WRITTEN BY<br>Lance Ippolito

Lance Ippolito

What to read next

Have any questions? Contact Our Customer Service Team

Share via
Copy link