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Hedge fund Melvin sustains 53% loss after Reddit onslaught

arstechnica.com

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Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#121

Post by caseysoftware »

dataflow wrote: post #101
robbomacrae wrote: post #91

Earlier quoted context omitted.

So many conspiracy theories on both sides these days. Don't forget Ocram's razor. I don't think there are many sophisticated actors here at all. I'm speaking as one who did DD on GME back in September and throw some money in (thought it was a great opportunity mainly because of Cohen + the upcoming console super cycle with a tiny chance of squeeze thrown in) It was a smart discovery by WSB and got a bit more than ave…

I wouldn't call it a conspiracy theory or call this out as an example of Occam's razor. > Collectively they can, and did, cause this.. no need to invent other actors to explain it. The thing is, people imagine this requires a lot of capital to pull off. How did WSB get so many people to invest so much into GME as to hit a hedge fund so hard? Do so many people really have that much money just to throw away? There is a…

As I noted in a similar thread a couple days ago..

When all of this started last fall, the price was bouncing between $5-10. Therefore, with as little as $500 (aka less than a stimulus check), you get 50-100 shares. Even as recently as ~3 weeks ago, it was $20-25/share. It cost more to buy in but still within reach for all but the smallest investors.

And that's not considering the options side.

As of the 19th (aka 12 days ago), you could still buy $35 calls for $12 with a Feb 19th expiration. That $1200 is worth upwards of $12-15k now.

Now multiply any of those by a couple hundred thousand investors, some with much more to put in.. and we still haven't touched the medium, let alone the BIG players.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#122

Post by gnarbarian »

dataflow wrote: post #101
robbomacrae wrote: post #91

Earlier quoted context omitted.

So many conspiracy theories on both sides these days. Don't forget Ocram's razor. I don't think there are many sophisticated actors here at all. I'm speaking as one who did DD on GME back in September and throw some money in (thought it was a great opportunity mainly because of Cohen + the upcoming console super cycle with a tiny chance of squeeze thrown in) It was a smart discovery by WSB and got a bit more than ave…

I wouldn't call it a conspiracy theory or call this out as an example of Occam's razor. > Collectively they can, and did, cause this.. no need to invent other actors to explain it. The thing is, people imagine this requires a lot of capital to pull off. How did WSB get so many people to invest so much into GME as to hit a hedge fund so hard? Do so many people really have that much money just to throw away? There is a…

A lot of us have a few thousand to yolo. I made money on it too. I'd say most of us were in it for the lulz. who cares if we lose.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#123

Post by Uehreka »

motohagiography wrote: post #58

%53, so far. The problem with the short interest being %140 is that the notional value of shares to cover that extra %40 is in fact, infinite. It's literally everything those funds can sell, borrow, and get bailed out to cover their position. My prediction last week was this has system wide implications, and I'm thinking 1. the Fed will intervene, leverage Robinhood's EULA, and buy out everyone's shares at a price th…

I’m far from an expert in this, but this seems wrong. My understanding is that even though shorts can in theory have “infinite downside”, in practice the short-sellers have to bail if they can’t post enough collateral to buy back the stock. And the 140% isn’t some “impossible fraction” thing, it just means that if there were 10 million shares before, well then now there are technically 24 million, and the short-sellers will need to buy back the “extra” 14 million in order to exit all their positions (not 100% sure if I got that right).

I get that the Redditors are doing something funky and unusual here, but whenever I see people talking about this being some sort of “buffer overflow! Game over, Man!” scenario, I get pretty skeptical. If markets survived April’s negative oil prices and the weirdness that entailed, I’m pretty sure they can survive a brief increase in the price of a small mall retailer’s stock.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#124

Post by gnarbarian »

wdn wrote: post #115
kyrieeschaton wrote: post #29

How much evidence is there that the "reddit onslaught" actually moved the price, as opposed to them being the stalking horse for more sophisticated actors with more capital exercising a vanilla short squeeze strategy?

Of course there are other big players that drive it. Retail investors are in no way able to move price.

Half of all robinhood accounts held GME.

Nevermind this is incorrect.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#125

Post by rantwasp »

PurpleFoxy wrote: post #8

The best part about this whole situation is news companies having to translate crude reddit humour and logic in to something old people can understand. Seeing them trying to explain why billions of dollars move because of people who refer to themselves as retards who want to earn money to buy chicken tenders.

DeepF***Value lol

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#126

Post by gruez »

kasey_junk wrote: post #116

Just for context Melvin has returned better than 30% returns yearly since 2014. There is a very good chance if you are in their fund you’ll look at the total return and be quite happy with the outcome, especially if their risk is decorelated with the other parts of your portfolio.

>Just for context Melvin has returned better than 30% returns yearly since 2014

That's funny because in another thread someone mentioned that's usually how a lot of "good" investment strategies go. They return above-average returns when the times are good, but they get wiped out every few years/decades by the tail risk.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#127

Post by Doolan »

dataflow wrote: post #101
robbomacrae wrote: post #91

Earlier quoted context omitted.

So many conspiracy theories on both sides these days. Don't forget Ocram's razor. I don't think there are many sophisticated actors here at all. I'm speaking as one who did DD on GME back in September and throw some money in (thought it was a great opportunity mainly because of Cohen + the upcoming console super cycle with a tiny chance of squeeze thrown in) It was a smart discovery by WSB and got a bit more than ave…

I wouldn't call it a conspiracy theory or call this out as an example of Occam's razor. > Collectively they can, and did, cause this.. no need to invent other actors to explain it. The thing is, people imagine this requires a lot of capital to pull off. How did WSB get so many people to invest so much into GME as to hit a hedge fund so hard? Do so many people really have that much money just to throw away? There is a…

Reddit users would be an amount of the capital in the GME situation, but far from the majority.

There's a huge amount of other hedge funds who actually control the vast majority of the capital screwing over Melvin at the moment. This whole scenario is hedge funds making money off of other hedge funds and a bunch of retail investors making a small amount but risking huge amounts when GME inevitably collapses.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#128

Post by kortilla »

xyst wrote: post #109

If only we can weaponize this collective power for shorting shitty companies that have caused irreparable damage to society and the world (O&G, Koch Industries). Right now the power of shorting companies is held by "institutional" investors simply because of how much funds are controlled by a select group of people and thus can buy and manipulate the market. I would die happy if I saw Exxon or BP go to zero.

You’re fundamentally misunderstanding the model for shorting. You don’t short companies that aren’t already failing or other investors will happily buy your shares and you’ll be the one squeezed out.

> I would die happy if I saw Exxon or BP go to zero.

The underlying company would actually need to go bankrupt for this to work. A bunch of shorts can’t sell a bunch of stock an expect it to wipe a company out. Otherwise the company will just continue on and the shorts will bleed out payments or even worse, just buy back all of its stock an go private, really screwing the shorts.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#130

Post by m3kw9 »

Judgmentality wrote: post #11
wrkronmiller wrote: post #5

> On Wednesday Melvin said it had exited its bet against GameStop and repositioned its portfolio. The firm moved to reduce risk in its investments following a turbulent start to January when it lost 30 percent in the first three weeks. Melvin’s leverage ratio is at the lowest it has been since the firm’s founding in 2014, said a source familiar with the firm. The news of Melvin’s January performance was first reporte…

The general assumption on WSB is that Melvin Capital is lying and that they haven't closed their positions. I haven't seen any evidence to suggest they've closed it, and have seen circumstantial evidence suggesting they have not. You don't spend money on ads saying "we no longer have a financial stake in this stock" unless you, you know, have a financial stake in this stock. Considering this is a hedge fund, I just a…

Given they lost 53 percent that does indicate the direction they closed a lot of it.
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