Online trading app Robinhood received tremendous blowback from investors last week after blocking purchases of GameStop (NYSE:GME) stock. While it said traders could sell their shares, Robinhood wouldn't let anyone buy the stock.
Although it eventually relented, the trading app has announced it is issuing new rules because of the market volatility, and it will let you buy only one share of GameStop's stock.
In what will surely anger traders further, the limit is an aggregate total, not per-order. That means if you already own one or more shares of GameStop, you cannot buy any more. It also limits traders to owning just five option contracts. It won't sell any stock or contracts you own in excess of the limit, but it won't let you buy more.
GameStop's shares blew up last week, rising 400% to close at $325 per share, and might have gone higher had Robinhood and other brokerages not coordinated a ban on buying the stock, which led to GameStop's shares plummeting.
Although Robinhood denies it received any outside pressure from hedge funds that were losing tens of billions of dollars on the trading, or from market makers having to cover the positions, many saw the restrictions as an attempt to protect Wall Street insiders.
The current limits will further fuel those beliefs as Reddit traders bought options contracts and prohibited them from being loaned out. By doing so, short-sellers couldn't extricate themselves from their positions as the short squeeze sent GameStop's stock soaring.
While the new limits on GameStop are the most restrictive, other popular stocks also have limitations, including AMC Entertainment (NYSE:AMC), which is limited to 10 shares and option contracts; Express (NYSE:EXPR), which is limited to 20 and 20; Genius Brands (NASDAQ:GNUS), which has limits of 600 shares and contracts; and BlackBerry (NYSE:BB), which is limited to 700 each.