Remember that wild retail vs hedge fund showdown a few years back? Yeah, that whole GameStop and AMC saga. Well, it basically came down to one thing: stocks with high short interest. And honestly, it was wild to watch unfold.

So here's what went down. A bunch of retail traders on Reddit started hunting for stocks that hedge funds had heavily bet against. They'd borrow shares, short them, betting the price would drop. But what the retail crowd realized was that if enough people bought these shares, it would force the short sellers to cover their positions at higher prices. That's called a short squeeze, and it cost some of the biggest hedge funds billions.

Melvin Capital? Lost 53% in January alone. They had to get a $2.8 billion emergency bailout from Citadel and Point72. Pretty brutal.

But let me break down what short selling actually is, because not everyone gets it. Basically, you're betting against a company. You borrow shares from your broker, sell them at today's price, and hope to buy them back cheaper later. If ABC stock is at $10 and you think it'll drop to $5, you short 10 shares. You get $100 cash. Then if it does drop to $5, you buy back those 10 shares for $50 and pocket the $50 difference. Simple concept, right? Except the risk is technically unlimited. If the stock goes up instead of down, you could lose way more than your initial investment.

That's why short squeezes are so brutal for the bears. When buying pressure overwhelms selling pressure, the stock rockets up. Short sellers panic and rush to cover, which pushes the price even higher. It's a feedback loop.

So what were the main stocks with high short interest that everyone was watching back then? GameStop was the big one. It had crazy short interest from institutions, and retail investors piled in. The stock went from like $17-19 to over $300 in weeks. Literally 1,600% in January. Even Elon Musk tweeted about it. GameStop had added Ryan Cohen from Chewy to the board, which gave people hope about a turnaround strategy. The company also reported a 309% jump in e-commerce sales during the holiday period.

Then there was AMC. The movie theatre chain got absolutely hammered by the pandemic, almost went bankrupt. But they raised $917 million and suddenly retail traders decided it was worth buying. The stock jumped 469% from mid-January. CEO Adam Aaron basically said bankruptcy was off the table now.

Virgin Galactic was another one people were watching. This space tourism company had 71.95% short interest. It was already up 158% over the prior year, then gained another 90% year-to-date before this all started. The stock squeezed even harder when retail traders caught on.

FuboTV was also on the list with 71.91% short interest. This streaming platform was growing fast, reporting 84% revenue growth and 72% subscriber growth year-over-year. But bears thought the streaming business was too risky, hence the high short interest.

And finally, Bed Bath & Beyond. BBBY had 65.48% short interest and basically doubled in a week once retail attention hit it. The company had improved its digital sales by 94% and total comparable sales by 77%, plus they had solid cash on the balance sheet.

The thing is, shorting stocks with high short interest is genuinely high-risk. Infinite upside risk, technically. If you're not comfortable with that kind of volatility, you probably shouldn't be playing in these names. But it was definitely a moment where retail investors proved they could move markets if they coordinated.

Worth understanding the mechanics though, whether you're trading these stocks or just watching from the sidelines.