One of the main ways to short-sell a company (bet against it) is to write contracts and sell them (these are known as "options"). These basically say "If you pay us $xx amount, we owe you 100 shares of GME for, let's say, $20/share". The expectation here is the stock won't get up to that $20 price before it expires (at which point the hedge fund keeps the money), if it's above $20, it's "In the Money" and they must give you 100 shares of the stock at $20/share. So even if the stock is at $355 - if you had a $20 contract, they owe you 100 shares at $20/share.

Looks like this:

Left side are "Call" options which is where the the hedge funds sell the contracts, you expect the stock will hit the price in the middle. The ones on the right are "Put" options, which are similar to covered shorts with even less risk, so you can short a stock without the risk of losing everything.

These are the ones expiring this Friday. The prices are price per share, each contract is 100 shares, so the actual price for the call 320 strike option is $10,490.
https://cimg0.ibsrv.net/gimg/dvdtalk...a57867118a.png

Those got oversold, severely, to the amount of 140% to the number of actual available shares, and the hedge funds didn't have the stocks to make good on the contracts.

So the stock was already getting higher due to /r/wsb interest, once the guy from Chewy joined the board the stock hit this place where all the available "Call" options were "In the money", and the hedge funds could no longer easily buy shares to cover them. The guys on reddit figured this out and began what's known as a Short Squeeze -- the Hedge Funds had millions of shares they had to buy and nobody was selling, so they had to offer more and more money for shares, and people kept holding out, and continue to do so. That's why the stock went up as quickly as it did, and to as high as it did for short periods of time. That's now compounded by general interest because they can't. stop. talking. about. it.

Options exercise at 4:00 PM every Friday, or whenever people manually do it. As such, the hedge fund folks have to buy the shares, at whatever price is asked, especially now that almost every available share is bought up and being held. If the stock is still above $320 on Friday at 4:00 pm, there's a good chance things are going to go sideways (the hedge fund firms claim to have all their shorts covered, but many, many people are calling them out on that.) It could also just as easily come crashing down. They reference it as a YOLO for this reason.

I've been staring at my stocks a lot today :lol: and fwiw, what happened with /r/wsb IS normally illegal in financial institutions/hedge funds, but since it's just a message board and nobody was being directed to do anything, just suggested, there's nothing that can technically be done about it.