Ramin Talaie | Bloomberg | Getty Images
GameStop is resurfacing after a wild session, pushing the stock back above $ 100 for a short time, but short sellers betting against the brick and mortar video game dealer are nowhere near easing.
GameStop's shares rose more than 20% to a high of $ 101.62 shortly after opening on Tuesday. After falling from the session high, the stock rose sharply when Social Capital's Chamath Palihapitiya said in a tweet that he had bought GameStop call options that would move the stock higher.
Trading was suspended for the second time following his tweet due to the volatility. The stock most recently rose 21% to around $ 91 per share.
GameStop was up more than 300% in January alone when an army of retail investors took on short sellers in online chat rooms, encouraging each other to stack up and push the stock higher. Short sellers have lost $ 4.2 billion in market value year-to-date, including a loss of $ 917 million on Monday and $ 1.6 billion on Friday, according to S3 Partners.
Despite the massive shortages, short sellers are doubling their bearish bets. In the past 30 days, GameStop shares borrowed and sold rose 1.4 million shares, valued at $ 91 million. This corresponds to an increase of 2%, as the share price has more than doubled, according to S3 Partners.
Short sellers have also reloaded bets in the past seven days, with short selling stocks up 769,000, valued at $ 50 million. GameStop's interest in shorts is unchanged from a week ago at 139%.
"Similar to the Revolutionary War, the first line of troops is drowning in a shower of musket fire, but is being replaced by the next troops," said Ihor Dusaniwsky, S3 managing director for predictive analytics, in an email. "We're seeing a short squeeze on older shorts that have suffered massive mark-to-market losses on their positions, but are seeing new shorts."
"This keeps the short positions in GME stock relatively flat overall, although there is a significant short squeeze on a significant number of existing short sellers," added Dusaniwsky.
The explosive rally in GameStop was mainly due to the buying frenzy of individual investors in online forums, especially the notorious Reddit chat room "wallstreetbets" with more than 2 million subscribers. A trend post on Tuesday includes a screenshot of the user portfolio showing a return of over 1,000% on GameStop stock.
GameStop had a roller coaster ride on Monday, during which the stock more than doubled and turned negative within a few hours. The stock closed 18% on Monday at $ 76.79.
The hedge fund Melvin Capital Management, which is short on GameStop, is down 30% through Friday this year, according to The Wall Street Journal.
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