As the short squeeze battle initiated by Reddit continues to affect the market, investors are turning their eyes away from stocks under $20 (like AMC Theaters and Express) as they search for the next target of the internet community.
Heavily shorted biotech stock Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) has seen a sudden surge in value as the “GameStop effect” bleeds into other companies that institutional investors expect to fail.
Learn more about Ligand Pharmaceuticals and how to buy LGND now.
How to Buy Ligand Pharmaceuticals Incorporated (LGND) Stock
If you’ve ever bought a share of stock before, you’re already familiar with the basic steps to buy LGND. LGND trades on the NASDAQ exchange, which means that if you already have a U.S.-based broker, you can buy the stock through your existing account.
If you’ve never bought stock before, follow these steps to get started.
- Pick a Brokerage
A broker is a financial company authorized to buy and sell shares of stock according to instructions that you place through the broker’s online platform. Because retail investors can’t buy and sell stocks directly, your broker is the medium to buy in LGND, day trade stocks under $5 or invest for your retirement.
The broker that you choose determines which assets you can buy and sell, the fees per investment and more. Note that while your broker will provide almost unlimited access to investing in U.S.-based markets, select brokers like Robinhood and T.D. Ameritrade have limited investor access to very volatile securities during the recent short squeeze. Check with each brokerage option before you open an account to be sure that you have access to the stocks you want to buy. - Decide How Many Shares You Want
After you open your brokerage account, decide how much money you want to invest in LGND and fund your account. You can choose a number of shares to buy by looking at the current market price of LGND and how it’s changing.
Can’t afford an entire share of stock? Most brokers allow investors to purchase fractional shares of LGND, which means you can invest with just a few dollars. - Choose Your Order Type
There are multiple types of stock order, and the stock order you choose will influence what you pay for each share of LGND you purchase. Let’s take a look at a few of the most common order types your broker may offer you access to, as well as some terms you might see on your stock analysis source.
Bid
The bid price is the highest price that a buyer is willing to pay for a select share of a specific stock.
Ask
The ask price is the lowest price that an investor who holds a share of a specific stock is willing to sell for.
Spread
The spread is the difference between the bid price and the ask price. Stocks with a high daily trading volume typically have small spreads, while stocks without as much volatility or small stocks under $10 might have a larger spread. Monitoring the spread and how it’s changing can help you decide on the most advantageous time to buy.
Limit Order
A limit order is a type of order executed at a specific price point. For example, if you place a limit buy order to purchase 10 shares of LGND with a limit price of $180, your broker will execute the order only if it is possible to invest in LGND at a price of $180 or lower per share. If the price of LGND rises above a price of $180 per share, your broker will not execute your order. Use a limit order when you want to invest in a security only at a particular price point.
Market Order
A market order is a type of order that executes as soon as it is received by the broker in most circumstances. When you place a market order, you won’t specify a price that you need your order to be executed at. This is because your broker will execute the order at the current market price, no matter what it is, so long as your account is funded accordingly. Use a market buy when you need an order to be executed as quickly as possible.
Stop-Loss Order
A stop-loss order is a type of sell order that protects you from volatile price dips. If you buy LGND at a price of $200 per share, you might set a stop-loss order to execute at $180. If the price of LGND drops to $180, your broker will automatically sell your shares. This helps protect you by ensuring that you won’t lose more than 10% of your initial investment.
Stop-Limit Order
A stop-limit order gives you more control over when you sell your shares. When you place a stop-limit order, you’ll set a lower stop price where your order begins and a higher limit price where your order is capped. For example, you might place a stop-limit order to buy LGND with a stop price of $180 and a limit price of $210.
If the stop price is reached, your order will be converted to a limit order and begin executing. If the price of LGND goes above the limit price, the order will stop. Stop-limit orders give you more control over when your shares are purchased, which can be useful for those who study price targets. - Execute Your Trade
After submitting your order through your broker, you can sit back and relax. Your broker will fill your order according to your specifications. If your broker can’t fill the order, it may cancel it at the end of the trading day.
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LGND Stock History
Ligand Pharmaceuticals is a biopharmaceutical company headquartered in San Diego, California. The company was introduced to the market as Progenx Inc. in 1987 and had its initial public offering in 1992. Though the company originally focused on the development of its own line of drugs, its focus shifted to acquiring existing drug companies after a period of turbulence in the early 2000s.
Ligand Pharmaceuticals’ stock price peaked in September 2018, when shares were trading at around $274 per share. After a sharp decline in value, Ligand Pharmaceuticals has seen a downtrend that lowered the price of the stock to just $82 a share in October 2020. The recent Reddit resurgence has contributed to a surge in the price of LGND, which has risen back to about $180 as of February 1, 2021.
Ligand Pharmaceuticals has surged in value following a short squeeze initiated by Reddit users.
Pros to Buying LGND Stock
By now, most investors are familiar with the Reddit-induced short squeeze, which pushed the price of GameStop (NYSE: GME) shares up over 1,126% since December 2020. Though the GME short squeeze has taken the majority of press attention, LGND is currently being targeted by retail investors as well.
LGND has been heavily shorted by institutional investors, which has caused retail investors to invest en masse to drive up the price before the short date arrives. Some experts estimate that Reddit users may continue to hold the LGND until the price of the stock reaches $600 a share to put further pressure on short sellers.
This can result in short-term profits for investors willing to enter in on a momentum play.
Cons to Buying LGND Stock
Though the short squeeze phenomena may drastically increase the price of a stock, it’s a short-term price movement. The current price of LGND most likely has less to do with future company developments and the fundamentals of the stock and much more to do with sudden short-term interest in heavily shorted stocks.
This means that the price of LGND may suddenly crash without warning, causing a significant loss in capital. If you do plan to become a long-term LGND investor, you must be prepared to handle these drastic dips.
Invest During Market Volatility
The stock market is experiencing a period of high volatility, especially among some of the market’s most heavily shorted investments. If you do plan to invest in a company showing higher-than-average volatility, understand that the price of the securities you invest in can decrease at any time.
Never divert funds away from long-term holds to participate in a short squeeze, and never invest more money than you can afford to lose in these types of opportunities.
About Sarah Horvath
Sarah is an expert in the insurance, investing for retirement and cryptocurrency space.