AMC Shorts Lose $500 Million in 1 Day

Despite losses of over $1 billion last month, short sellers remain attracted to AMC like moths to a flame:

Investors shorting “meme stock” AMC Entertainment Holdings (AMC.N) are estimated to have lost about $512 million on Monday after a rally that sent the cinema operator’s shares up more than 15%, data from financial analytics firm Ortex showed.

They are up against staggering volume from retail traders, among others:

Recent reports from brokerages Fidelity and Freetrade show AMC has been the most traded stock by their customers, many of whom are small-time investors.

More here.

These losses by short sellers likely understate the total losses by AMC bears. Many have taken option positions that benefit if AMC’s price drops. Those positions are going sour rapidly, leading one hedge fund to lose approximately $400 million earlier this month.

There are other strategies AMC skeptics could adopt, like buying puts (limited downside) rather than selling calls (unlimited downside). Or, they could buy credit default swaps on AMC’s bonds.

But AMC’s volume is more than double that of any other stock today and a substantial percentage of shares are still sold short, making another short squeeze a possibility. The safest spot for bears is on the sidelines.

More on AMC:

Photo: “Burn Money” by purpleslog is licensed under CC BY 2.0

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