LOG IN
SIGN UP

Tye Peer

02/21/2021 12:46

Does anyone know what interest rate hedges are paying? Even at 100% interest, with 55 million shares at 6 bucks a piece, if they pay their interest daily, I think that comes to 330 million dollars/year.

We don't know though if they are paying that high yet (seems unlikely). Someone with a margin account could check that information by attempting to short a share and reading through the warnings (don't actually agree to the last step and open a short position though). We also don't know what value the stocks had when they borrowed them.

There are some tings some of you may know, but I do not. I don't know whether their doubling down by borrowing more shares to sell each other for short ladders effectively closes their old positions and then reopens them at a lower price. I aldo don't know whether the interest rates are fixed or variable for hedges, nor whether the interest charged is based on current closing price or price at the time stock was borrowed.

Still holding, but be prepared for it to be a long hold unless we can get another good catalyst.

$AMC Ent Holdg $Naked Brand $Genius Brands $Express
Disclaimer: The comments, opinions and analysis expressed herein are for informational and educational purposes only and shoulk not be considered as individual investment advice or recommendations. Webull is not responsible or liable in any way for comments posted by pur users.

Like

Share to:

Download the Webull App and join community for discussions about the post. Download

All Comments(9)

Tye Peer02/21/2021 14:32
Put differently, let's use Fintels number, about 2% annual interest. Let's also assume hedges are short 50 million shares (for simplicity). This means take the price per share and multiply by 1 million, now you have how much hedges are paying per year to borrow. At 6 dollars per share, that means 6 million dollars to hold short for a year.

Now consider alternative, which is pay a thousand dollars per share to exit. That would come to 50 billion dollars.

There is no incentive for them to cover unless price rises. I think that will require some additional catalyst (e.g. amc has good news in their earning statement, or Netflix/Amazon decides to buy them). Buy and hold helps, but even if we hold all shares, price won't start to rise unless they decide to cover, and it sounds like they have been given an absolute sweethart deal on interest.

Limitless Power02/21/2021 21:35

👌🏻

Tye Peer02/21/2021 14:34

For comparison, nakd has 700k shares available to short but 15% borrow fee rate

Like

lgo***com02/21/2021 14:08
A short sale is the sale of a stock that an investor thinks will decline in value in the future. To accomplish a short sale, a trader borrows stock on margin for a specified time and sells it when either the price is reached or the time period expires.

For example, consider a company that becomes embroiled in scandal when its stock is trading at $70 per share. An investor sees an opportunity to make a quick profit and sells the stock short at $65. But then the company is able to quickly exonerate itself from the accusations by coming up with tangible proof to the contrary. The stock price quickly rises to $80 a share, leaving the investor with a loss of $15 per share for the moment. If the stock continues to rise, so do the investor's losses.  

From what I've read it's not an interest owed deal. It's more like they have to cover the spread if the stock goes up.
I could be wrong I'm just an ape

lgo***com02/21/2021 16:22

Thanks Tye, here's a follow up on that from investopedia.

Understanding Buying on Margin

The Federal Reserve Board sets the margins securities. As of 2019, the board requires an investor to fund at least 50% of a security's purchase price with cash. The investor may borrow the remaining 50% from a broker or a dealer.

Tye Peer02/21/2021 14:24

Both/and. Interest puts pressure on then to start covering, regardless of whether they have an apparently large or small loss, or even sn apparent gain. With sufficiently low interest, the pressure vanishes. Prices rising with unlikely to fall also puts pressure on to cover, but I suppose you could always wait it out.

Like

erik618802/21/2021 13:59
It was down to 1.9% annually. Take that with a grain of salt, they also changed the numbers of available short shares from 650,000 to 1.2mil. 🤷‍♂️

atomik8602/22/2021 16:07

everythings suspicious lately with these hedges lol

Tye Peer02/22/2021 01:22

yeah, seems a bit suspicious

Like

Tyler Martin02/21/2021 13:45
4.5 ish

Like

sko***com02/21/2021 13:19
100%!?!? where did you hear 100%. pretty sure its like 2-3% depending on the agreement between the lending house and the borrower/hedge fund/short seller.

Tye Peer02/21/2021 13:48

I am not claiming it is 100%, to clarify. Just picking a high number as sn example

Like

??Dime Bag Dave??02/21/2021 13:11
I have the same question! Like someone can crunch the numbers and estimate the number of short shares and with the % interest find out a idea hOw long they can afford to hold their short posItion for.

I Don’t think this has to be a long hold but why we can’t move this up one $1 is beyond me. With everyone that bought And held this over the last few weeks and all it did was go down.

Like

LimpLogs02/21/2021 13:08
In my opinion, idk we will ever know their plan or be able to control it - Just buy and hold and dont overthink for a little - itll pan out

Like

dav***com02/21/2021 13:01
according to fintel, the short borrow fee rate is 1.95%

Tye Peer02/21/2021 13:49

Per year. At that rate, hedges may not notice the loss. Only upside is if we keep them tied to it, it reduces their liquidity.

Tye Peer02/21/2021 13:12

That seems too low, unless that is the per day rate

Like

Hot Article
$GameStop $AMC Ent Holdg yall approve of my portfolio?mic***com 03/06/2021 21:40
$AMC Ent Holdg this shit better go up i told my boss at work to join the gang plz dont let me down 💀💀💀💀💀💀Los.A 03/06/2021 19:39
$AMC Ent Holdg The Nail to the coffin 860****921 03/06/2021 16:56