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Hedge fund Melvin sustains 53% loss after Reddit onslaught

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

#311

Post by Anon1096 »

m3kw9 wrote: post #273
fractionalhare wrote: post #196

Earlier quoted context omitted.

The arguments that Melvin lied about closing their position are as follows: 1. Short interest on GME is still high, even after they claimed to have closed their short position. 2. They have a "huge incentive" to lie about this, because people believe it would encourage a selloff. That is the entirety of the evidence. It is uncritical despite the fact that it gets frenetically repeated on reddit. Here is the evidence…

Makes sense, but don’t let this spoil the party back at wsb

You'd just get banned if you write this there.

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

#313

Post by shmoogy »

fairity wrote: post #163
newacct583 wrote: post #14

Earlier quoted context omitted.

The stock is currently around $300, up by a factor of five from last week and much more than that over its historical base. The question should be who isn't shorting GME, not leading questions about a conspiracy theory as to whether or not Melvin actually closed its shorts or not. I mean, I haven't shorted GME personally. But I've absolutely joked with friends that it's an obvious play. Maybe I should.

You can avoid the borrowing fee and margin call risk by purchasing PUT options. The $320 PUT expiring in 1 year costs $240. I purchased 2 contracts on Wednesday bc I don't see a scenario where the price doesn't crash back down below $60 within a year. Expected ROI of 10-20%. Not a large return, but also a pretty safe bet imo considering their ATH prior to this squeeze was $60, and that was back in 2007.

Won't IV collapse from the ludicrous 800% killing any gains? Better to sell cash secured put to gain the premium then sell the underlying maybe?

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

#314

Post by worik »

robbomacrae wrote: post #91
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?

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 do not agree that Occum's razor is much help here.

AFAIK this is completely unprecedented. A crowd of whomever and bankers with clients money at stake, disagreeing so absolutely about fundamental values. A mass action making the third corner of a very strange triangle.

The explanation you offer (it's sensible, except it is not one hedge fund) is no more or less complex than a conspiracy. What ever is going on there are a lot of moving parts.

I am not making predictions!

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

#315

Post by nrmitchi »

lc3sim wrote: post #305
fractionalhare wrote: post #196

Earlier quoted context omitted.

The arguments that Melvin lied about closing their position are as follows: 1. Short interest on GME is still high, even after they claimed to have closed their short position. 2. They have a "huge incentive" to lie about this, because people believe it would encourage a selloff. That is the entirety of the evidence. It is uncritical despite the fact that it gets frenetically repeated on reddit. Here is the evidence…

I am not a financial advisor and this is not financial advice. I understand your response. There is one assumption that I think marks the difference between what side of the line one falls on. My understanding of your belief is that you think Melvin would not lie due to there being a large risk associated with lying. One might also assume that Melvin would not be dumb enough to short over 100% of GME stock. In exerci…

> I am not a financial advisor and this is not financial advice.

Okay as soon as I read this I knew I shouldn't be expecting much, but...

> My understanding of your belief is that you think Melvin would not lie due to there being a large risk associated with lying.

This really isn't just lying a little bit, and isn't just a large risk. If you're running a fund like this, purposely making materially false statements like this would be akin to jumping out of a plane without a parachute and somehow hoping for the best, while 5M angry redditors are purposely trying to make sure you crash into the hardest thing possible. This position of "well maybe he's lying, you can't definitively prove he's not!" position is so bonkers that it's closer to a conspiracy theory than an actual opinion.

> One might also assume that Melvin would not be dumb enough to short over 100% of GME stock.

This has been discussed in depth elsewhere. You're understanding of this concept is fundamentally flawed. Frankly, even if it wasn't, you're suggesting that a single firm shorted more than 100%? Or that both Melvin Capital and Citron both shorted more than 100%, and that somehow added up (with your misunderstanding) to 140%?

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

#316

Post by alasdair_ »

Uehreka wrote: post #123
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-selle…

It may be worth reading up on when this happened before: https://moxreports.com/vw-infinity-squeeze/

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

#317

Post by fractionalhare »

lc3sim wrote: post #305
fractionalhare wrote: post #196

Earlier quoted context omitted.

The arguments that Melvin lied about closing their position are as follows: 1. Short interest on GME is still high, even after they claimed to have closed their short position. 2. They have a "huge incentive" to lie about this, because people believe it would encourage a selloff. That is the entirety of the evidence. It is uncritical despite the fact that it gets frenetically repeated on reddit. Here is the evidence…

I am not a financial advisor and this is not financial advice. I understand your response. There is one assumption that I think marks the difference between what side of the line one falls on. My understanding of your belief is that you think Melvin would not lie due to there being a large risk associated with lying. One might also assume that Melvin would not be dumb enough to short over 100% of GME stock. In exerci…

There is also no evidence they singlehandedly shorted over 100% of GME stock. All of these claims and rumors unravel when you demand evidence. They might make sense if you assume their circular dependencies, but it's a house of cards.

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

#318

Post by dcolkitt »

jabberwcky wrote: post #300
dcolkitt wrote: post #294

Earlier quoted context omitted.

> The S&P most certainly outperformed Melvin on a risk-adjusted basis due to this single drawdown alone. The S&P had a 54% drawdown in 2008.

Which could have been anywhere between an 81% to 810% drawdown in a typical leveraged strategy. Very few levered positions would have survived it without stopping out or completely blowing up, but an unlevered position absolutely could have -- and most (long term buy and hold) did

I'm not sure what you're talking about. Most hedge funds did significantly better than the S&P in 2008. They were down, but nowhere to the same degree.

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

#319

Post by dataflow »

nrmitchi wrote: post #315
lc3sim wrote: post #305

Earlier quoted context omitted.

I am not a financial advisor and this is not financial advice. I understand your response. There is one assumption that I think marks the difference between what side of the line one falls on. My understanding of your belief is that you think Melvin would not lie due to there being a large risk associated with lying. One might also assume that Melvin would not be dumb enough to short over 100% of GME stock. In exerci…

> I am not a financial advisor and this is not financial advice. Okay as soon as I read this I knew I shouldn't be expecting much, but... > My understanding of your belief is that you think Melvin would not lie due to there being a large risk associated with lying. This really isn't just lying a little bit , and isn't just a large risk . If you're running a fund like this, purposely making materially false statements…

Question: what do you think of this comment? https://news.ycombinator.com/item?id=25984635

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

#320

Post by fractionalhare »

f430 wrote: post #304
fractionalhare wrote: post #269

Earlier quoted context omitted.

Melvin does not presently have a parent hedge fund, and it never has. It received investments from two other hedge funds, but those were for non-controlling revenue share.

https://en.wikipedia.org/wiki/Melvin_Capital does seem like a relationship to me and if so they likely have Cohen's liquidity close by. Rarely are these groups independent, they all eat from the same bowl, a very large one at that. I just do not believe they have thrown in the towel. Wouldn't you be drunk with lust when you realize a very rare opportunity? Timing isn't the concern here its the inevitability of the ob…

Yes they have a relationship, it's known that Point72 has been an investor. That doesn't imply ownership or even majority stake. It's very common for funds to invest in other funds, just like it's common for large tech companies to have business development and VC arms.
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