Margin debt on brokerage accounts in the US reached a record $937 billion in January 2025, a 33% increase compared to the same period last year, a clear indicator of growing risk appetite among retail trading.
The emergence of commission-free trading apps and the ease of access to margin accounts have attracted a multitude of retail trading to the market. Along with this has come a familiar and risky pattern: euphoria, rampant speculation, and the tempting but dangerous promise of outsized returns through leverage.
While borrowing to amplify profits can work in bull markets, it also exposes retail trading to brutal losses when the trend reverses. In today’s environment, characterised by high volatility, social media-driven sentiment, and rapid news cycles, reversals occur faster and more sharply than ever before.
So, which stocks are showing the most obvious warning signs of excessive leverage among retail trading? Using publicly available indicators such as spikes in options market activity, margin exposure, retail trading ownership trends, and volatility, we have identified seven stocks with the highest levels of leveraged financing.
Ranking the Most Overleveraged Retail Stocks
Obtaining accurate data on margin positions for a particular stock is difficult, but there are clear signs of excessive risk-taking among retail trading, especially when using borrowed funds. To identify such stocks, we analysed five key indicators.
The Top Seven
Each category was regarded on a scale from 1 (low risk) to 5 (extreme risk), with a maximum possible score of 25.
1. AMC Entertainment Holdings (AMC)
Why is the company overloaded with debt? AMC remains a favourite among stock traders, often becoming the subject of memes. Many investors are taking out loans to bet on rising stock prices, even though movie ticket sales are falling and the company’s financial situation is under pressure.
2. GameStop Corp. (GME)
Why is the company excessively indebted? GameStop is still benefiting from the euphoria that arose during the “meme stock” era. Many retail trading continue to take out loans to bet on another significant price increase, even though the company’s actual business has hardly grown.
3. MicroStrategy Incorporated (MSTR)
Why is there excessive debt? MicroStrategy shares are extremely risky because their value is highly dependent on sharp fluctuations in Bitcoin’s price, and many investors also take out loans to bet on it, making it even more volatile.
4. To get it done. (Kavana)
Why the company is excessively indebted: Carvana attracts many investors hoping for rapid price growth, and many of them are taking out loans to increase their stakes. However, the company’s precarious financial situation makes it a hazardous investment.
5. Tesla, Inc. (TSLA)
Why the stock is overvalued: Tesla has many devoted fans who borrow money to make short-term bets on the stock price rising. But if perceptions of the company change, the stock price could fall rapidly.
6. Coinbase Global, Inc. (COIN)
Why this is an excessive reliance on borrowed funds: Coinbase offers stock market investors an easy way to bet on cryptocurrency prices, but this doubles the risks. Significant price fluctuations and government regulation make it even more dangerous.
7. Beyond Meat, Inc. (BYND)
Why is the company excessively leveraged? Beyond Meat’s stock fluctuates wildly as investors hope for a possible improvement in the situation. However, the company’s weak financial position and the large number of short positions against it make it a hazardous investment for investors trading on borrowed funds.
Why Leverage is Spiking Again
After a downturn in 2022 and early 2023, leverage use among retail trading has surged. Lower interest rates, renewed optimism in the technology sector, and a resurgence of stock market memes have encouraged many investors to take on even more risk.
The increase in leverage this year signals a return of stock market speculation. While leverage can amplify gains, it can also leave investors extremely vulnerable if market sentiment shifts.
Add to this a wave of enthusiasm among retail trading on platforms like Reddit, YouTube, and Discord, and you have the perfect recipe for a bubble of inflated, leveraged stock positions.
The Verdict: Invest with Caution
Retail trading has revolutionised market dynamics, but it has also increased volatility and risk. When speculative fever is combined with easy access to leverage, crashes can happen quickly, especially in the most volatile, actively traded stocks.
If you are trading any of these stocks:
- Be clearly conscious of the risks associated with using leverage.
- Use strict stop-loss levels.
- Adjust position sizes conservatively.
- Focus on risk management, not just profit expectations.
Ultimately, in a market driven by speculation and excessive debt, the winners are not the loudest or most aggressive investors, but those who remain calm, stick to their plan, and do not allow emotions to dictate their actions. Discipline will always prevail over impulsiveness when the stakes are high.