Illinois-headquartered Redbox Entertainment (NASDAQ:RDBX) operates a network of self-service kiosks where consumers can rent or purchase movies on DVD or Blu-ray. Plus, Redbox also provides content streaming services. The company is going through major changes now, so RDBX stock is only appropriate for traders who can handle the risks involved.

Chances are pretty good that if you live in the U.S., you’ve seen at least one of those red kiosks that dispenses movies to rent. In a time of high inflation, Redbox offers consumers a relatively inexpensive form of entertainment.

Yet, it seems that Redbox may be shifting away from physical DVDs and Blu-rays and toward content streaming. The company is undergoing a big change, so you’ll want to learn the essential facts before jumping into the trade.

What’s Happening with RDBX Stock?

RDBX stock — which, as we’ll discover, could soon have a different ticker symbol — jumped 34% on the morning of Jun. 13. It’s a volatile stock that has veered in different directions over the past six months.

However, there was recently a notable development. At the end of May, InvestorPlace contributor Chris MacDonald identified Redbox as a top short-squeeze opportunity. MacDonald observed that the stock’s short interest was around 180% of its float, which is quite high.

Along with that, MacDonald noticed the “staggering cost to borrow of nearly 720%” for RDBX stock. These factors can attract the attention of the Reddit short-squeeze crowd.

Then, on Jun. 9, InvestorPlace contributor Joel Baglole reported that the Redbox share price soared more than 80% in five trading days. I agree with Baglole when he assesses this move as [l]ikely a short squeeze.”

The point is that it’s probably not a wise move to bet against RDBX stock now. Trading short-squeeze stocks can be tricky, but a small long position in Redbox may be justifiable.

From Physical to Digital

Even beyond the short-squeeze possibilities, there’s a monumental event happening with Redbox. Specifically, Chicken Soup for the Soul Entertainment (NASDAQ:CSSE) has agreed to acquire Redbox.

“The combination of Chicken Soup for the Soul Entertainment and Redbox will create a leading independent, integrated direct-to-consumer media platform delivering premium entertainment for value conscious consumers,” the press release declared.

So, don’t be surprised if RDBX stock disappears at some point to be replaced by a different ticker symbol. Hopefully, the acquisition will help Redbox improve its financial situation. During 2022’s first quarter, Redbox incurred a net earnings loss of $40.87 million.

This event came on the heels of Redbox announcing a chief financial officer transition. Perhaps the biggest change of all, though, is the apparent shift in Redbox’s business model. Redbox Chief Executive Officer Galen Smith stated, “By joining forces, we will accelerate Redbox’s transition from a physical to high growth digital media company and be the only entertainment provider truly focused on value for consumers.”

Does this mean Redbox will divest its physical kiosks and go all-digital? Only time will tell, so stay tuned as Redbox potentially transforms into a notably different business.

What You Can Do Now

Redbox’s major changes mean that RDBX stock could be volatile for a while. Plus, it’s not always easy to trade short-squeeze candidates.

Therefore, stay small in your position size if you plan to invest in Redbox. The company’s apparent shift from physical to digital could be a smart move, but traders should exercise caution until the dust settles.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.