Are Hedge Funds About To Get Margin Called by JP Morgan?
According to RISK.net JP Morgan warns hedge funds of intraday margin calls. This sounds very similar to proposal 002. The U.S bank may demand margins up to “7 times per day” according to sources.
The tough love comes from the fear of losing money and covering hedge fund positions like global banks did with Archegos Capital earlier this year. It seems like they’ve started to notice a pattern here.
As always, I’ll give you my take on what this means for us retail investors and how it plays into AMC’s short squeeze news.
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Ladies and gentlemen banks have had enough. They’re tired of getting screwed over by hedge funds overleveraging their short positions. When hedge funds cannot cover the entire hit, brokers have to cover the rest.
JP Morgan is trying to prevent from becoming like one of the affected brokers that suffered significant losses due to Archegos shorting Viacom and Discovery earlier this year.
Although the SEC might be oblivious to what’s going on, this bank sure isn’t. And if you remember, Charles Schwab has also raised margin requirements for short sellers shorting both AMC and GME stock.
Archegos meltdown resulted in billion dollar losses for global banks
Banks to massive losses due to Archegos Capital overleveraging their positions in highly shorted stock such as Viacom and Discovery.
Wells Fargo was one of the banks that did not suffer any losses. “We had a prime brokerage relationship with Archegos,” the bank said. “We were well collateralized at all times over the last week and no longer have any exposure.”
According the Reuters, Morgan Stanley lost nearly $1 billion dollars from the collapse of Archegos. Other banks hit were Credit Suisse Group and Nomura Holdings which were affected the most.
Global banks were expected to lose between $5-$10 billion dollars according JP Morgan. And now it seems JP Morgan is taking the precautions necessary to avoid enormous losses too. By issuing intraday margins, they make sure short sellers have enough cash at hand as collateral. This could possibly be the catalyst for what we’ve been waiting for.
If margin accounts cannot keep up with the daily demand for new cash in its accounts, JP Morgan may instantaneously close out overleveraged positions. This will cause AMC stock to soar.
Hedge funds and family offices are affected
Archegos was technically a family office managing billions in assets, not a hedge fund. Well now JP Morgan is demanding both hedge funds and family offices post more cash during the day if their trades loses value.
The news was provided to Risk.net by three people who are familiar with the matter. No further information aside from these intraday margin requirements were relayed by the publication.
If JP Morgan sees too much risk within some accounts, and they will, they have the power to liquidate margin accounts short selling both AMC and GME stock. The results would drive these stocks high enough to force all shorts out of their positions.
Managing margin call news expectations
It’s important for the community to take into consideration that most news regarding margin calls have merely been neutral, so far.
If this JP Morgan margin call news plays in our favor then excellent! We could very well begin seeing some short covering. But if it doesn’t, another catalyst will end up squeezing shorts out of their positions. This may be a new wave of volume or other brokers who do not want to risk their investments through these overleveraged hedge funds.
However, positive news like this should feed your conviction. When you’re in need of strength, borrow mine.
I personally believe were getting closer to this chapter coming to an end as hedge funds continue to face serious scrutiny. Think about this for a second, the cards are against them.
Retail investors, banks, whales, and the public are all against them. I’m interested to know your thoughts, leave me a comment below. Are you ready for this short squeeze? And when do you personally think this will liftoff?
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Show CommentsSo did Discovery and Viacom squeeze in March? Or were they in a position to squeeze and Archegos liquidation stopped it? Just trying to understand what happened. As for AMC, I’m hopeful for the squeeze to still happen this summer and have been holding for 2 months now.
So, just curious myself as an also-newbie… how do others of the “meme stocks” figure into this? I’ve been trying to learn, but am a bit confused since there are a number of them. Why is everyone focusing on AMC? I happened to buy some – totally unaware at that time that it was anything other than a movie chain! – last March, just trying to get a retirement fund invested in things I thought would be opening up soon. (such as airlines, hotels, movie theaters, etc.) Wow. Turned out to be fortuitous for me, huh? But since then, trying to understand better, I’ve noticed the others (besides the obvious GME), like BB, BBBY, CLVR, & the one I also bought into big-time in March (just b/c I love space stuff), SPCE. That one’s been awesome, too. And now I’ve noticed “them” talking about everyone piling into some FANG stocks and others, like TSLA.
Can someone here explain which ones are actually good buys vs. bad? I was really looking at BBBY recently, because it seems like a great company, but keeps going down. I’d like to buy some, but am waiting to see how far it goes down. Same with SPCE. I sold when it hit 50% gains for me, but now I want back in. But it just keeps dropping since that fateful announcement. Oh, and also, all you who continue to hold AMC, I’m really wondering if there are enough of us to really make more and better changes in the company? I may not have been part of “the in crowd” at reddit “they” always talk about, but I’ve been in AMC for a long time, too. 😉 Best to all here.
Hi Finn,
Honestly AMC just seemed to be the better buy. The fundamentals had drastically improved, the CEO was heavily involved with the ape community, etc. I wouldn’t say there’s a good vs bad buy. Your purchase depends on your conviction towards that stock. If you feel like those other stocks will do great after doing your own DD then by all means hold them and support the businesses. AMC has been scored perfect scores to squeeze and so the community is essentially holding until things come together at the right time.
Well I’m a newbie, and just on want a co worker of mine keeps telling me, to hold because this squeeze is coming , I’ll say in late August, taking a guess I think up to $500.00 hopefully more then that… Thanks for educating us newbies with you wisdom….
It’s you’re money, but me and many other people believe you’re wasting potential selling a single amc share below $1k, join his discord to speak with part of the community> https://discord.gg/mpBf9Zyc
Dont sell below $1k, it has much more potential, join Frank’s discord, alot of good people and information there
I’m betting the squeeze is before September. I watch with anticipation every day through the drops and rises of AMC. Every day I remind myself to hold hold hold! This squeeze is going to happen because it must happen.
It’s coming! 🚀
I believe most of us know what they are doing and they are trying to frustrate and wait the retail folks out.
☝
Love the article as usual but I’m worried about the community. I only bring this up because (besides the vibe getting weird in the last few days, which is probably just due to restlessness) but also because I watched a fellow ape who only provided good DD (literally correcting a date that some data was published) getting kicked today. If you could explain the situation I would appreciate it (I can provide the details) otherwise you can erase this and I’ll bounce too, you built something great and either way I appreciate it.
Alot of newer people are down, but do remember, many bots and shills are taking to reddit and YouTube (probably elsewhere) and commenting why AMC is bad, and people are idiots for still supporting it.
I am sooo ready for the dramatic squeeze! Your articles always help me, a newbie, understand more, and I am grateful for them. However, it is a little like trying to take a drink through a fire hose! I am glued to the chat, too.