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By Julien Ponthus
LONDON, Jan 28 (Reuters) - A tug of war between solo stock traders piling into GameStop (NYSE:GME) GME.N and seasoned hedge funds betting against the U.S. video game retailer has unleashed a wave of copycat trades.
Retail investors who have squeezed institutional short sellers, are also forcing them to cover their losses by selling long positions in other stocks, opening a Pandora's box and rattling blue chip indexes from Asia to Europe.
Far from being limited to niche segments, the 'Reddit crowd', with its use of call options and coordinated buying, has had a direct impact on the overall stock market.
Stocks which hedge funds bet against the most have soared, while their own favourites lost out due to the selling pressure.
A basket of stocks traded mostly by hedge funds has fallen 2.5% so far this year, while a basket tracking retail favourites jumped 13.5%, data from Goldman Sachs (NYSE:GS) showed.
It did not take long for the success of the 'long the shorts' trade to be emulated by investors in Asia and Europe who have also piled into stocks which were popular shorts.
In Europe, publisher Pearson PSON.L , drugmaker Evotec EVTG.DE and commercial property firm Unibail-Rodamco URW.AS and Klepierre LOIM.PA were all big gainers this week.
Heavily-shorted Australian stocks Webjet WEB.AX , Tassal Group TGR.AX , Inghams ING.AX and InvoCare IVC.AX all rose on Thursday, while the benchmark ASX 200 index .AXJO fell 2%.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ US most shorted index soars as wider market cools
https://tmsnrt.rs/36mHWcx Hedge funds scrambling to exit shorts, cut losses
https://tmsnrt.rs/3prlMgN Asia's 'ant' and 'moth' investors test broker nerves
"We love this stock": GameStop effect spreads as calls for probe build
Short sellers face derision, death threats and unexplained pizza