AMC’s short borrow fee is rising again and short sellers are now paying more to short AMC stock.
This is the fee short sellers pay to borrow and short the stock.
It fell as low as 0.30% earlier this year but has now risen to 18.60%.
Although the short borrow fee is still relatively low, the progression could lead to more impactful losses.
Last year hedge funds lost billions betting against the world’s largest movie theatre chain.
Overleveraged positions with high short borrow fee rates only multiplied losses.
Rising short borrow fees could incentivize short sellers to completely ditch the play and close their short positions as shorting becomes more expensive.
Let’s break it down together.
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AMC’s short borrow fee increases
AMC’s short borrow fee rate has steadily been increasing as the markets have tanked.
It comes as no surprise that the fee to short AMC stock would increase during this liquidity crisis.
The SPY officially hit bear market territorytwo weeks ago, but the market bounced rather quickly, trading just above bear market levels.
AMC continues to be one of the heaviest shorted stocks in the market.
It wiped billions of dollars from hedge funds shorting it last year.
And with a high short interest of 22.52%, AMC has more than enough juice to squeeze shorts from their positions.
But AMC’s short borrow fee rate and short interest percentage aren’t the only metrics increasing.
Pressure is escalating as AMC’s shares on loan reach an all-time high.
Pressure escalates as AMC’s shares on loan skyrocket
AMC’s current shares on loan have reached 185 million.
These shares on loan eventually have to be returned to the lender by buying back the stock in the lit market (NYSE).
The massive buying pressure is going to create a high demand for the stock.
As the demand for the security goes up, so does the cost to buy it (the value of the security).
When AMC surged to $72 per share in June, it had roughly just over 100 million shares on loan and a short interest of 24% before falling to 20%, then 14%.
Today, AMC’s shares on loan have hit 191 million with a high short interest of 22.52%.
Will AMC’s increasing borrow fee rate force shorts to close positions?
AMC’s increasing short borrow fee rate may certainly incentivize short sellers to close their short positions.
The stock is slowly becoming harder to short and the cost to borrow it might prove to not be worth risking significant losses as the market adjusts itself for a reversal.
At some point, it’s going to be time to start betting long.
As you can tell, short sellers have the biggest risk here.
One simple bull rally can eliminate short sellers’ portfolios.
And with the SPY showing significant strength in the $400 level, one can assume the markets have potentially found a bottom.
The SPY momentarily hit official bear market levels last week but has managed to trade just above it.
A significant break upwards could bring the entire markets back up, hurting short sellers.
Be sure to connect with me on social media for daily updates.
Also, join the discussion in the comment section of the blog down below.
Market News: The SEC attacks retail investors with propaganda
The SEC meme stock video is circulating all over social media due to its surprisingly and unprofessional attack on retail investors.
The agency was created in the 30s after the Great Crash to prevent fraud and protect retail investors from predatorial practices conducted by Wall Street.
But something happened along the way – the branch has proved to take a stance with congress in tailoring policies for financial institutions.
Who is going to protect retail investors from the corrupt?
Former SEC Branch Chief expresses her thoughts on the propaganda published by the SEC.
Let’s discuss it.
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Join the newsletter to become part of an activist group fighting for market transparency!
Receive weekly market news to stay up to date.
SEC publishes meme stock video
If you haven’t watched the SEC meme stock video, it’s embedded below.
SEC Meme Stock Video
The SEC published the video on their official YouTube channel where they restricted public commenting.
Former SEC Branch Chief Lisa Braganca said she was “very disappointed to see the SEC disparage investors in meme stocks as if they must have done it thoughtlessly – especially when the SEC permits most trading to take place in dark pools.”
She then tweeted, “how about a video on dark pools Gary Gensler?”
Lisa Braganca is an activist who fights for market transparency.
She’s talked on Matt Kohrs’ channel before and has done an AMA on Reddit’s r/Superstonk answering questions about self-regulatory regulations, SEC regulation, and SEC enforcement.
Gary Gensler admitted in a Bloomberg exclusive 90%-95% of retail orders don’t go through the lit exchange but failed to mention a solution to the problem.
In an interview with Jon Stewart, the SEC Chairman fails to deliver a quality and productive discussion on solving the problems in the market.
Jon Stewart described Gary Gensler as a sheriff in town that allows blatant corruption to occur.
For Gary, it’s clear it’s more about keeping the job rather than creating a legacy.
Activism matters
The SEC’s meme stock video might try to portray retail investors as young and clueless novice investors.
But that’s far from who the retail community is.
Retail investors outsmarted hedge funds, exposed the corruption in the SEC, mainstream media, and are now attacking with this propaganda.
It’s a sign of weakness.
The retail community is made up of a very diversified group of people all fighting for the same cause.
And this is a threat to corporate media and powerful institutions.
Republicans and democrats getting together to fight for market transparency, what!?
But this isn’t just about the left and right getting together to combat corruption, it’s a global movement – and opps (opposers) don’t like this.
Banks, market makers, and hedge funds are all very well aware of the trouble stocks with extremely high short interest can mean for them.
Financial institutions have been overleveraging printed money to help hedge funds keep up with margin requirements and borrowing costs.
Hedge funds have have lost billions despite turning a few profits recently from plays such as AMC and GameStop.
Still, any ‘gains’ seen on paper can easily turn upside down with another upswing. Long short sellers are going to burn new shorts getting in on these plays.
Welcome to Franknez.com – S3 Partners are reporting a 100/100 short squeeze score again based on algorithms. An AMC short squeeze is inevitable.
Let’s get started!
If you don’t know who S3 Partners are, they’re a company similar to Ortex. These companies gather real-time short interest data and other analytics.
Ortex may not have a short squeeze predictability score but S3 Partners does.
The algorithm has put AMC at a 100/100 short squeeze score. And although this score fluctuates from time to time, it should be no surprise that AMC has hit this predictability score more than once.
AMC’s short interest is at an outstanding 17.65%! This is self-reported and could be significantly higher.
This high short interest was just recently around 20%. Did some shorts cover?
And if so, what will happen to AMC’s stock price next?
Iceberg Research Closes AMC Position
Iceberg Research analyst has closed their AMC positions, down 30%. For those who aren’t familiar with short selling, down 30% means they profited 30% from their initial entry.
I saw apes had this information mixed up. The analyst also took it to Twitter to explain this.
They stated, “we may open shorts later”.
What mad the analyst close their short position in AMC? It makes you wonder how many other small short positions could have closed too.
Iceberg Research closing their short position is extremely bullish for AMC shareholders.
It proves that AMC has set a new bottom. It’s retested the mid to high $30 range about three times now.
This bullish sign of strength could be the reason why this short seller decided to take profits now before another massive upswing.
Which if you ask me, was very smart.
AMC’s has very high short interest which means it has enough fuel to move the stock relatively high.
Iceberg Research mentioned they would possibly open short positions later signifying it’s something they would do when the price is significantly higher for them to profit from on the way down to new levels.
Do Stocks Go Up When Shorts Cover?
Activity from covering may create a chain reaction where other shorts begin to cover their positions.
Whether shorts close their positions with gains or losses, a stocks share price increases due to buying pressure from shares being bought back.
How Long Does It Take For A Closed Short Position To Settle?
According to the SEC, the settlement cycle is about 3 business days.
Iceberg Research announced they closed their position in AMC on Monday October 11th.
Meaning the transaction would not be reflected until mid to end of the week.
How much AMC’s share price moves up will depend on whether these short sellers were mainly small individuals or large financial firms.
Are Short Sellers Profiting From AMC?
Short sellers who entered during AMC’s runup are profitable. But not everyone is up. Large financial firms who shorted AMC earlier this year are still facing apocalyptic losses.
Don’t Short AMC Stock – They Can Soar To ‘Unimaginable Highs’, CNBC
AMC still has a very high short interest meaning there are original short sellers betting the stock will go low enough to finally make a profit.
Thing is AMC gets extremely uncomfortable when it gets pushed down a cent below $30.
The best strategy for short sellers holding losses would be to close now before AMC claims a higher level of resistance, resulting in even greater losses.
And for new short sellers, CNBC warned about unprecedented highs back in June even as it peaked saying, ‘resist the temptation’.
Because even those who are profitable on paper, another major upswing can change that in one day.
The high short interest in AMC is a ticking time-bomb due to the explosive effect a few short sellers can trigger from closing.
Iceberg Research for example took profits without the care of other short sellers, even though it means the price is subject to move up from such a move.
That’s the danger of short selling AMC, this simple update from the analyst could trigger smaller positions to close, ruining the play for other shorts holding their positions.
For retail, this would mean a surge in price action.
Retail Investors Are In It For A Short Squeeze Play
This is another advantage retail investors have over short sellers. Short sellers are paying a fee, must keep up-to-date with their margin requirements, and have no control over other shorts.
You could be short on AMC stock but if a financial firm closes due to a margin call, you could lose a massive chunk of your portfolio.
Retail investors continue to raise the bar regardless of AMC’s current share price.
The community continued to buy the stock at $50, $60, and $70.
That’s because retail’s conviction towards how much AMC is worth is beyond what short sellers can comprehend.
Profitable short activists are better off taking profits and getting in on this short squeeze play against market manipulators.
Both retail investors and short activists want to make money. A short squeeze would yield some of the biggest gains any party has ever seen.
We’re seeing that as AMC’s short interest continues to climb, the play is set up for bigger upswings.
This is bad news for shorts holding the stock as new levels of resistance are being created during these upswings.
AMC’s short interest reached a high of 9% back in January when it topped $20 per share.
Short sellers jumped in and raised the short interest to 20% where the stock ran up to $72 per share.
After this runup, AMC’s short interest fell to 14.76% before continuing to move back up to it’s current percentage.
The original 9%-20% is an 11% increase. From 14.76% to the high of 21% we saw not too long ago is another 6% increase.
Here we can see short seller sentiment. Fewer of them are willing to get burned on this short squeeze play.
Short activists have the decision to close positions now while AMC’s share price is extremely close to it’s new base price.
Failure to do so and you may get caught in significant losses that are awaiting hedge funds and bigger short sellers alike.
It Takes One Major Upswing To Ruin Short Position Gains
How many waves can short sellers tolerate? Short sellers going long on their plays are burning cash passively from borrowing fees.
The next major upswing AMC has will set a new foundation.
The $30 range will no longer be AMC’s base price but rather $70-$80 respectively.
And we’re talking about the floor here, not AMC’s upswing peak. This next peak could very well reach hundreds of dollars from mere momentum pressure.
And although AMC’s share volume has decreased recently, we’ve seen this pattern happen right before retail and whales create massive buying pressure again.
It only takes one massive upswing to create a chain reaction of buying from both new retail investors and short sellers.
Both sides are looking at their strategies. It’s not costing retail investors anything to hold their stock.
Apes continue to buy when they have the means available. A community with a ‘why’ is much stronger than individuals trading for small profits on the way down.
It’s only a matter of time before larger financial firms begin taking profits from shorting AMC stock and leave smaller short sellers behind.
Or vice versa. AMC’s extremely high short interest is a ticking time-bomb.
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