The GameStop Short Squeeze: Put-Call Parity and the Effect of Frictions Before, During and After the Squeeze

Abstract

The short squeeze in GameStop attracted worldwide attention and resulted in congressional hearings. The increase in price from $21 to $483 over a short period of time was not the result of obvious fundamental earnings prospects. Excess demand by investors on a social media site accompanied by the short-covering resulted in the stratospheric ascent of stock price. We use put-call parity to investigate the related issue of the no-arbitrage violations before, during, and after the squeeze. We do not find evidence of abundant free money after accounting for short-selling frictions.