Amc stock short case and melvin capital leverage question

[Fullbear2222]

The question is what leverage the Melvin capital used ?  
And why he did not used limit orders to short ? If only using 2x-3x leverage wich i think he did used then just before the liq price to use next limit order with a bit of higher quantity Even 5x Will move liq price way up and it could be safe.
Or did Melvin capital used futures or options trading way to short it ?

Then I think the melvin capital ceo has no knowledge about much of trading ?
Did he learned hard way so next time he Will be better

[1715084652]

1715084652

[1715084652]

1715084652

[1715084652]

1715084652

[Bitcoin_Arena]

The reason your post is not getting any response is that you just post a question without any backstory in form of quotes or links to the articles. Moreover, members here mostly trade cryptocurrencies, so if you are to ask about a stock or any other form of commodities, it's better you start off with some background summary to bring members on the same page. 

The question is what leverage the Melvin capital used ? 

They have the answer

And why he did not used limit orders to short

Limit orders also eventually get executed and this can be visible in the order history or different position hit maps if the position is huge.

? If only using 2x-3x leverage wich i think he did used then just before the liq price to use next limit order with a bit of higher quantity Even 5x Will move liq price way up and it could be safe.

Are you surely you know what trading using Leverage means?

Or did Melvin capital used futures or options trading way to short it ?

[EarnOnVictor]

The question is what leverage the Melvin capital used ?  
And why he did not used limit orders to short ? If only using 2x-3x leverage wich i think he did used then just before the liq price to use next limit order with a bit of higher quantity Even 5x Will move liq price way up and it could be safe.
Or did Melvin capital used futures or options trading way to short it ?

Then I think the melvin capital ceo has no knowledge about much of trading ?
Did he learned hard way so next time he Will be better

This is a story that people are quickly forgetting and which I don't think is related to the current dispensation anymore. However, Melvin Capital is a hedge fund, an American investment management firm that by its mode of operation hedged the positions of investors. That's the norm for hedge funds.

They lose when you gain and gain when you lose. This is not about the leverage of a thing but their positions were unfavoured with meme stocks and adequate liquidity was against them.

[Wind_FURY]

The question is what leverage the Melvin capital used ?  
And why he did not used limit orders to short ? If only using 2x-3x leverage wich i think he did used then just before the liq price to use next limit order with a bit of higher quantity Even 5x Will move liq price way up and it could be safe.
Or did Melvin capital used futures or options trading way to short it ?

Then I think the melvin capital ceo has no knowledge about much of trading ?
Did he learned hard way so next time he Will be better

It was not that the people behind the company didn't know what they were doing. It was Hubris. Because they have gotten very used to winning for so long that they underestimated that a group of plebs from Reddit who were working together could play an institution in their own game, and out-trade them. Plus because of Hubris and believing they won't lose, they kept adding more money in the trade and thought that the plebs of Reddit would stop and give up.

[Vispilio]

The question is what leverage the Melvin capital used ?  
And why he did not used limit orders to short ? If only using 2x-3x leverage wich i think he did used then just before the liq price to use next limit order with a bit of higher quantity Even 5x Will move liq price way up and it could be safe.
Or did Melvin capital used futures or options trading way to short it ?

Then I think the melvin capital ceo has no knowledge about much of trading ?
Did he learned hard way so next time he Will be better

There are several factors at play in that debacle. Melvin Capital CEO is well versed in trading and he increased his short positions with the confidence that he was shorting GME in much greater quantities than the free float, so even if everyone else went long, there won't be enough shares to push the price against him...

However he did not factor in his calculations that the retail community would discover this anomaly, which clearly should have been illegal and proceed to rally against hedge funds to buy all the free float and never sell. Therefore eventually, the increasing borrowing costs of holding a short position drives the shorters to margin calls and bankruptcy, even if they pull the manipulative trick of shorting beyond the free float.

Nevertheless, in another notoriously criminal example of "too big to fail", dark overlords of corporate america stepped in and this time they literally removed the buy button from the then favorite retail app Robin Hood, arguably the most sinister manipulation of free markets ever observed...

Result was GME eventually calmed down and reverted to a more modest valuation, as the holders could not buy anymore but only were permitted to close their positions, so most of the hedge funds could cover their shorts without blowing up (and even profited on the downturn), and Melvin Capital was just the token sheep that was allowed to "fail" to maintain a semblance of legitimacy. Another pure evil chapter from the history of Wall Street...

[Wind_FURY]

The question is what leverage the Melvin capital used ?  
And why he did not used limit orders to short ? If only using 2x-3x leverage wich i think he did used then just before the liq price to use next limit order with a bit of higher quantity Even 5x Will move liq price way up and it could be safe.
Or did Melvin capital used futures or options trading way to short it ?

Then I think the melvin capital ceo has no knowledge about much of trading ?
Did he learned hard way so next time he Will be better

There are several factors at play in that debacle. Melvin Capital CEO is well versed in trading and he increased his short positions with the confidence that he was shorting GME in much greater quantities than the free float, so even if everyone else went long, there won't be enough shares to push the price against him...

Aren't naked shorts illegal? Plus isn't it required under the law that market makers should always provide liquidity in both the bid and ask sides? But OK, whether Melvin Capital cheated or not isn't important anymore. They were still out-traded by the plebs who coordinated their trades in Reddit, a public forum. Haha.

However he did not factor in his calculations that the retail community would discover this anomaly, which clearly should have been illegal and proceed to rally against hedge funds to buy all the free float and never sell. Therefore eventually, the increasing borrowing costs of holding a short position drives the shorters to margin calls and bankruptcy, even if they pull the manipulative trick of shorting beyond the free float.

They thought that they already had the market "arranged fraudulently" that they would never lose. Hubris.

Nevertheless, in another notoriously criminal example of "too big to fail", dark overlords of corporate america stepped in and this time they literally removed the buy button from the then favorite retail app Robin Hood, arguably the most sinister manipulation of free markets ever observed...

Result was GME eventually calmed down and reverted to a more modest valuation, as the holders could not buy anymore but only were permitted to close their positions, so most of the hedge funds could cover their shorts without blowing up (and even profited on the downturn), and Melvin Capital was just the token sheep that was allowed to "fail" to maintain a semblance of legitimacy. Another pure evil chapter from the history of Wall Street...

Plus their Subreddits were banned, which made it harder for the community to coordinate. Perhaps next time they use more than one stock brokers, and coordinate in Discord + Telegram.

Should theymos welcome them in the forum? I believe their plebs and our plebs could learn from each other.

[Vispilio]

Aren't naked shorts illegal? Plus isn't it required under the law that market makers should always provide liquidity in both the bid and ask sides? But OK, whether Melvin Capital cheated or not isn't important anymore. They were still out-traded by the plebs who coordinated their trades in Reddit, a public forum. Haha.
 

Normally let's say you own a stock and you agree to a stock enhancement program by your broker, then the broker can lend that stock to a shorter who then can sell it to open a naked short position in the market, this is available for both retail and institutions.

However what happens in some sinister cases, is that the broker gets the lending fee and then lends the same stock again held at its custody, so now you might end up with 100 shares long of a certain stock (let's say GME), but that same quantity might get shorted 2-3x against you; especially if some hedge funds / institutional investors who have close knit relationships with the brokers have a vested interest to keep the price down.

This obviously creates huge problems against fair and orderly market participation...

Plus their Subreddits were banned, which made it harder for the community to coordinate. Perhaps next time they use more than one stock brokers, and coordinate in Discord + Telegram.

Should theymos welcome them in the forum? I believe their plebs and our plebs could learn from each other.

Hahah, yes that's an excellent idea, there is great overlap between wallstreetbets degens and crypto degens...

[Wind_FURY]

Aren't naked shorts illegal? Plus isn't it required under the law that market makers should always provide liquidity in both the bid and ask sides? But OK, whether Melvin Capital cheated or not isn't important anymore. They were still out-traded by the plebs who coordinated their trades in Reddit, a public forum. Haha.
 

Normally let's say you own a stock and you agree to a stock enhancement program by your broker, then the broker can lend that stock to a shorter who then can sell it to open a naked short position in the market, this is available for both retail and institutions.

 

That's not a naked short. That's the usual process of how short selling is legally done in the stock market. A naked short is selling a stock that you don't actually own, and it's illegal in today's market.

However what happens in some sinister cases, is that the broker gets the lending fee and then lends the same stock again held at its custody, so now you might end up with 100 shares long of a certain stock (let's say GME), but that same quantity might get shorted 2-3x against you; especially if some hedge funds / institutional investors who have close knit relationships with the brokers have a vested interest to keep the price down.

This obviously creates huge problems against fair and orderly market participation...

OK, so Melvin Capital, which had a "special relationship" with its broker and did something illegal? What broker was that? That should be reported to the SEC.

Plus their Subreddits were banned, which made it harder for the community to coordinate. Perhaps next time they use more than one stock brokers, and coordinate in Discord + Telegram.

Should theymos welcome them in the forum? I believe their plebs and our plebs could learn from each other.

Hahah, yes that's an excellent idea, there is great overlap between wallstreetbets degens and crypto degens...

🤝

Front-run the billionaires together.

[Vispilio]

Normally let's say you own a stock and you agree to a stock enhancement program by your broker, then the broker can lend that stock to a shorter who then can sell it to open a naked short position in the market, this is available for both retail and institutions.

 

That's not a naked short. That's the usual process of how short selling is legally done in the stock market. A naked short is selling a stock that you don't actually own, and it's illegal in today's market.

However what happens in some sinister cases, is that the broker gets the lending fee and then lends the same stock again held at its custody, so now you might end up with 100 shares long of a certain stock (let's say GME), but that same quantity might get shorted 2-3x against you; especially if some hedge funds / institutional investors who have close knit relationships with the brokers have a vested interest to keep the price down.

This obviously creates huge problems against fair and orderly market participation...

OK, so Melvin Capital, which had a "special relationship" with its broker and did something illegal? What broker was that? That should be reported to the SEC.

In this context naked short is just an umbrella term for shorting shares you don't own (actually it means unhedged short), if it were strictly done in the "legal" sense you are understanding, no stock would have over 100% of its free float shorted, and yet it happens pretty often for something that was supposedly "banned" years ago  .

https://www.reuters.com/business/retail-consumer/how-were-more-than-100-gamestops-shares-shorted-2021-02-18/

Here is just 1 way of how it happens, but I guarantee you there are also other methods through creative accounting practices which brokers excel at, and all these regulations and inspections are easily overlooked when it's an influential hedge fund initiating the short positions...  

[Wind_FURY]

Normally let's say you own a stock and you agree to a stock enhancement program by your broker, then the broker can lend that stock to a shorter who then can sell it to open a naked short position in the market, this is available for both retail and institutions.

 

That's not a naked short. That's the usual process of how short selling is legally done in the stock market. A naked short is selling a stock that you don't actually own, and it's illegal in today's market.

However what happens in some sinister cases, is that the broker gets the lending fee and then lends the same stock again held at its custody, so now you might end up with 100 shares long of a certain stock (let's say GME), but that same quantity might get shorted 2-3x against you; especially if some hedge funds / institutional investors who have close knit relationships with the brokers have a vested interest to keep the price down.

This obviously creates huge problems against fair and orderly market participation...

OK, so Melvin Capital, which had a "special relationship" with its broker and did something illegal? What broker was that? That should be reported to the SEC.

In this context naked short is just an umbrella term for shorting shares you don't own (actually it means unhedged short), if it were strictly done in the "legal" sense you are understanding, no stock would have over 100% of its free float shorted, and yet it happens pretty often for something that was supposedly "banned" years ago  .

https://www.reuters.com/business/retail-consumer/how-were-more-than-100-gamestops-shares-shorted-2021-02-18/

Here is just 1 way of how it happens, but I guarantee you there are also other methods through creative accounting practices which brokers excel at, and all these regulations and inspections are easily overlooked when it's an influential hedge fund initiating the short positions...  

OK, then they "cooked" the game and played against the plebs, believing that they will win with Zero Probability of losing, and they may have probably done it many times during the past. That how they might have made most of their capital. Hahaha. But it took just one trade that had the plebs of Reddit coordinating together that broke the institution of Melvin Capital. It was Hubris. Hubris was what caused their death. They could have just taken the loss and covered their short.

Play stupid games, win stupid prizes.

¯\_(ツ)_/¯

[adaseb]

They have been doing this naked shorting for years with any company they knew was on the verge of bankruptcy. And at first they weren’t in danger. I think they started to short GME at like $10-15. So when it spiked to $30 or $50 it wasn’t an issue.

However with all those apes buying OTM strikes like $100 for pennies on the dollar which lead to a huge gamma squeeze is why the stock spikes so high and so fast. Basically tons of demand and no supply. I think I bought GME at $10 but I had an order to sell at $20. Feel like a complete idiot.