GameStop vs. The Big Short: Which Was the More Epic Trade?
- Dana at Vibe NYC Tours
- Aug 11
- 11 min read
There are profitable trades, brilliant trades and trades so spectacular that they escape the financial pages and become part of popular culture.
Michael Burry’s bet against the American housing market belongs in that final category. So does the 2021 GameStop short squeeze, when an assortment of individual investors, professional traders, internet detectives and unapologetic gamblers pushed one struggling retailer into the center of the financial universe.
Both trades had everything Wall Street loves to pretend it has outgrown: arrogance, leverage, panic, forced buying, fortunes made and careers damaged. Both began with investors noticing something the market had badly mispriced. Both pitted outsiders against some of the most powerful institutions in finance.
But they were fundamentally different trades.
Burry’s Big Short was a forensic investigation conducted largely alone, years before the rest of the market understood the danger. GameStop was a publicly discussed pressure campaign that became stronger as more people joined it. One man bet that a seemingly invincible system would collapse. An internet army discovered that a dangerously crowded trade could be attacked.
So which was more epic?
The answer depends on whether we are judging the quality of the trade—or the size of the spectacle.
First, We Need to Define “The GameStop Trade”
The Big Short can be attributed fairly cleanly to Michael Burry. He developed a thesis, selected the securities he wanted to bet against and persuaded major banks to sell him the instruments he needed.
GameStop is harder to reduce to one trader.
Keith Gill—known online as Roaring Kitty and DeepF***ingValue—became the individual most closely associated with the trade. But the eventual short squeeze was not his private creation. Michael Burry had purchased GameStop before Gill became famous. Ryan Cohen’s investment helped establish a credible turnaround narrative.
Reddit users analyzed the company, circulated the short-interest figures, bought shares and options, posted screenshots and turned “diamond hands” into something between a trading strategy and a declaration of war.
Then came momentum traders, hedge funds, market makers, options dealers, algorithms and millions of people who did not want to miss the most exciting market event of their lives.
Therefore, the fairest comparison is not simply Michael Burry versus Keith Gill. It is Burry’s housing trade versus the entire GameStop phenomenon—with Gill as its most recognizable protagonist.
And there is a delicious complication: Michael Burry appears in both stories.
Scion Asset Management began pressing GameStop’s board to use its cash for share repurchases in 2019. By April 2020, Burry and his affiliated entities reported owning 3.4 million shares, representing approximately 5.3% of the company. The shares had cost roughly $13.6 million, according to Scion’s SEC filing. Burry was not betting on an internet uprising. He saw an unloved company whose market price failed to reflect its cash, assets and potential for an aggressive reduction in its share count. Scion’s GameStop filing with the SEC
There is an important distinction, however: Burry did not hold the position through the famous January 2021 squeeze. Scion sold its remaining GameStop shares during the fourth quarter of 2020. He identified the underlying value and the extraordinary short interest, but he exited before the Reddit-fueled explosion.
The man made famous for finding the housing short was also early to the stock at the center of the greatest short squeeze of the social-media era.
What Michael Burry Saw in the Housing Market
Burry did not simply wake up one morning and decide that American housing looked expensive.
He went into the mortgage bonds.
That distinction matters. Plenty of people believed housing prices had become irrational. Believing that something is overpriced is not the same as determining exactly how, when and through which instrument to bet against it.
Burry studied the individual mortgages buried inside mortgage-backed securities. He examined borrower credit quality, loan-to-value ratios, underwriting standards and the dates on which low introductory interest rates would reset. He concluded that a wave of adjustable-rate mortgages would begin failing when borrowers’ initial “teaser” payments expired.
The apparent safety of the bonds depended on the assumption that large numbers of homeowners would not default at the same time. Rising home prices concealed weak lending because distressed borrowers could sell or refinance. Once prices stopped rising, the escape route would disappear.
Burry believed the failure would become visible around 2007. He began establishing his position in 2005.
There was a problem: he could not simply short many of the specific mortgage bonds he considered most vulnerable. The market he needed did not yet exist in a sufficiently usable form.
So he approached Wall Street banks and asked them to sell him credit-default swaps.
A credit-default swap functions somewhat like insurance on a bond. Burry agreed to pay regular premiums. If the mortgage bonds continued performing, the banks would collect those payments and Burry’s fund would steadily lose money. If the bonds failed, the value of his protection could soar.
His first deals reportedly included $60 million in credit-default swaps purchased from Deutsche Bank in May 2005. He deliberately chose protection on mortgage bonds containing the loans he believed were most likely to deteriorate. He was not merely betting against “housing.” He was selecting where the structure was weakest.
Then he had to wait.
Being Early Is Usually Indistinguishable From Being Wrong
This is where the Big Short becomes more impressive than a simple market prediction.
Burry was correct about the mortgages before the prices of the related securities reflected that deterioration. Borrowers began falling behind, yet the bonds and their ratings did not immediately collapse. The banks continued collecting premiums from his fund while marking his swaps at values Burry disputed.
His investors could see the payments going out. They could not yet see the enormous payoff coming back.
Some demanded their money. Others questioned his judgment. Burry restricted withdrawals to avoid being forced to dismantle the position before the thesis played out. The trade threatened his fund, his relationships and his professional reputation.
That is a different kind of pressure from watching a volatile stock move against you for an afternoon. Burry endured the slow psychological violence of being ridiculed while the underlying evidence told him he was right.
When the mortgage market finally cracked, the swaps exploded in value. Burry reportedly earned approximately $100 million personally and generated more than $700 million for his investors.
More important than the final number was the quality of the process. Burry identified a structural defect, found the exact securities containing it, helped create a way to trade the thesis and held the position through a long period in which the market refused to acknowledge what was happening.
That is analysis at its most obsessive.
What the GameStop Traders Saw
The GameStop thesis was simultaneously simpler and more chaotic.
By 2020, GameStop looked like an obvious casualty of technological change. It sold physical video games through thousands of retail stores while customers increasingly downloaded games directly to consoles and computers. The pandemic made the outlook appear even worse.
Short sellers piled in.
But the bearish argument became so popular that it created its own vulnerability. When too many investors short the same stock, the trade can become unstable.
To short a stock, an investor generally borrows shares, sells them and hopes to repurchase them later at a lower price. But if the stock rises instead, the short seller’s losses increase. Because a stock can theoretically rise without limit, the potential loss on a short position is also theoretically unlimited.
If short sellers begin buying shares to close their positions, that buying can drive the price higher. The rising price places additional pressure on the remaining shorts, prompting more of them to buy. This is the self-reinforcing mechanism of a short squeeze.
GameStop had an extraordinary setup. According to the SEC’s subsequent analysis, its reported short interest reached 122.97% of its public float in January 2021. Shares could be lent, sold short, purchased and lent again, allowing reported short interest to exceed the number of shares readily available for trading. SEC Staff Report on GameStop and the 2021 meme-stock events
Anyone examining those figures could see the loaded spring.
The long thesis was not entirely based on squeezing short sellers. GameStop still had valuable brand recognition, cash-generation possibilities and an intensely loyal customer base. Burry had argued that aggressive share repurchases could dramatically increase the value represented by each remaining share. Ryan Cohen brought both capital and the possibility of a digital transformation.
Keith Gill’s analysis emphasized that the company could survive and that its depressed price did not reflect the possibility of even a modest turnaround.
The extreme short interest added rocket fuel to that value argument.
GameStop Was Not Merely a Short Squeeze
One of the most persistent oversimplifications is that GameStop rose solely because short sellers were frantically covering.
Short covering unquestionably mattered, particularly during sharp portions of the move. It inflicted enormous losses and helped demonstrate how dangerous the short side had become. But the SEC found that the sustained price appreciation could not be explained by short covering alone. Positive sentiment and buying by new investors were major forces in the ascent.
GameStop became a social event.
Reddit posts turned securities analysis into serialized entertainment. Traders shared positions in public, challenged one another to hold and treated every dip as a test of loyalty. Memes transmitted ideas faster than traditional research reports. Options increased the available leverage. Media coverage attracted still more buyers.
The number of unique accounts trading GameStop on a typical day reportedly rose from approximately 10,000 at the beginning of January to roughly 900,000 by January 27.
This was no longer a small group exploiting an overlooked valuation. It had become a reflexive machine: the rising price produced attention, attention produced buyers, buyers produced a higher price and the higher price intensified the danger faced by short sellers.
Then, on January 28, several brokerages restricted customers from purchasing GameStop and certain other volatile stocks.
The explanation involved collateral requirements and the machinery of clearing and settlement, but to furious individual investors, it looked like Wall Street had changed the rules when its preferred clients began losing.
That perception became inseparable from the GameStop story.
The episode forced congressional hearings and regulatory scrutiny of short selling, payment for order flow, brokerage capital, options trading, clearing requirements and the influence of social media. The SEC later described GameStop as the clearest convergence of dramatic price movement, enormous volume, high short interest, Reddit attention and mainstream media coverage. SEC announcement accompanying its GameStop report
Burry’s trade exposed rot inside mortgage finance. GameStop exposed the plumbing—and the public-relations problem—inside the modern stock market.
Which Trade Required More Foresight?
Burry wins this category decisively.
The GameStop short interest was public. The company’s valuation could be analyzed from its financial statements. The potential for a squeeze was visible once investors knew where to look. Gill deserves enormous credit for doing the work while most people dismissed the stock as a doomed mall retailer, but the thesis became increasingly observable as the movement developed.
Burry’s housing work required him to look through highly rated securities and reject the assumptions used by banks, rating agencies and institutional investors.
He also had to predict timing. A bearish observation is not useful if the investor cannot survive until the market recognizes it. Burry connected mortgage-reset schedules to future defaults and then constructed a trade intended to remain alive long enough to profit from them.
GameStop traders found an extraordinary imbalance.
Burry found a systemically important illusion.
Winner: The Big Short.
Which Trade Involved More Personal Conviction?
This one is closer than it looks.
Gill continued publicly defending his GameStop thesis while exposing himself to ridicule, financial volatility and eventually congressional questioning. Individual investors held through price swings that would make most professionals nauseated. Some rejected life-changing profits because they believed the squeeze had further to run.
But GameStop offered something Burry did not have: a crowd.
The crowd could provide research, reinforcement, entertainment and a sense of collective purpose. Even when the financial risk remained personal, participants knew thousands of others were watching the same chart.
Burry spent much of his trade isolated. His own investors revolted. His counterparties controlled the marks on the instruments. Every premium payment made him appear more wrong. He had to maintain conviction without a cheering section—and often in direct conflict with the people whose capital he managed.
Winner: The Big Short.
Which Trade Produced the Greater Market Drama?
GameStop, and it is not remotely close.
The housing crash was vastly more consequential, but Burry’s individual trade unfolded slowly and privately. The broader crisis became public only as financial institutions began failing.
GameStop happened in real time, on millions of screens.
People who had never read a balance sheet were suddenly discussing short interest, option strikes, market makers, settlement periods and margin requirements. A Reddit message board appeared to put multibillion-dollar hedge funds on the defensive. Billionaires, politicians, regulators, celebrities and first-time traders all entered the conversation.
A bricks-and-mortar video-game retailer briefly became a symbol of economic populism.
That is epic.
Winner: GameStop.
Which Was the Better-Constructed Trade?
The Big Short wins again.
Burry’s thesis specified what would fail, why it would fail and approximately when the failure would accelerate. He chose instruments that could create an asymmetric payoff: limited recurring premium expenses in exchange for enormous gains if the bonds collapsed.
That did not make the trade safe. The timing risk, investor redemptions and dependence on counterparties were enormous. But the analytical architecture was exceptional.
The GameStop setup also offered asymmetry, especially for early investors. A stock can fall only to zero, while a squeeze can drive it many multiples higher. Options allowed some traders to risk relatively modest sums for extraordinary potential returns.
But as the price climbed, the quality of the trade changed. Someone purchasing GameStop before the crowd arrived was buying a neglected company with a possible catalyst. Someone purchasing after a vertical price increase was betting on continued buying, short capitulation and the ability to exit before everyone else.
Early GameStop and late GameStop were not the same trade.
The Big Short remained anchored to deteriorating mortgages. GameStop eventually became anchored partly to the behavior of other traders.
Winner: The Big Short.
Which Trade Changed Wall Street More?
The Big Short had the greater connection to a world-changing event. The collapse of mortgage securities helped produce bank failures, government bailouts, mass foreclosures, new regulations and a global recession.
However, Burry did not cause the crisis. He diagnosed it and positioned himself to profit.
GameStop did not threaten the global economy, but it permanently changed the relationship between markets, online communities and individual investors. Wall Street learned that publicly available information could be turned into a coordinated narrative at extraordinary speed. Hedge funds learned that a crowded short could attract not only competing professionals but an enormous online audience actively searching for vulnerability.
Brokerages and regulators were forced to confront how mobile trading, gamification, social media, options and instant communication interacted with market infrastructure built for a different era.
GameStop changed market culture. The housing collapse changed the world.
Winner: The Big Short for economic importance; GameStop for trading-culture impact.
The Verdict: The Big Short Was the Greater Trade, but GameStop Was More Epic
If I were judging these episodes as a trader, Burry wins.
His housing short required deeper original research, greater independence, a more sophisticated instrument and an almost inhuman ability to remain committed while clients and counterparties treated him as though he had lost his mind. He did not merely recognize that housing was expensive. He found the precise machinery through which bad mortgages had been transformed into supposedly safe assets—and identified where that machinery would break.
The Big Short was the better trade.
But “better” and “more epic” are not identical.
GameStop was the more epic market event because it was public, participatory and gloriously unruly. It turned the stock market into a worldwide spectator sport. It forced Wall Street to confront an opponent it did not understand: a decentralized crowd that communicated through research, jokes, anger, screenshots and memes.
Burry’s trade was a masterpiece performed largely behind closed doors.
GameStop was financial street theater.
Therefore, my final decision is split—but clear:
Michael Burry’s Big Short was the greatest feat of trading. The GameStop short squeeze was the more epic trade to witness.
And perhaps that is the most fitting outcome. Burry wins the trophy for analysis, courage and execution. GameStop wins for drama, chaos and permanently entering the cultural bloodstream.
Wall Street has seen larger fortunes made. It has seen more complex strategies and more consequential collapses.
But it may never again see a trade quite like either one.
