When Do Shorts Have to Cover Their Positions? (AMC)

When do shorts have to cover their position?

Every retail investor holding a position in AMC wants to know, when will shorts cover their positions? And I don’t blame you.

This one is a little tricky. See, it’s like saying, “when will retail investors sell their positions?”

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Retail investors have been waiting patiently for AMC Entertainment stock to rip. You’ve been holding through the ups and downs and even buying the dips.

So, why aren’t shorts covering their positions yet? What do retail investors need to do to squeeze hedge funds out of their money?

Are shorts obligated to close their positions?

Let’s start with the fundamental question. Are shorts obligated to close their positions? Now, there are currently no rules regarding how long a short can hold before closing out their position.

However, lenders do have the right to demand the seller closes their position with minimal notice. This is rare and only occurs if the the seller isn’t paying the interest fee, or the interest fee is ridiculously high.

“A short position may be maintained as long as the investor is able to honor the margin requirements and pay the required interest and the broker lending the shares allows them to be borrowed.” – Investopedia

When an interest fee is extremely high, it makes a stock difficult to borrow which obligates the short seller to close their positions.

AMC’s short borrow fee rate as of 9/17 is: 0.90% according to Stonk-O-Tracker.

Keep an eye on this interest as it will determine just how much shorts are bleeding. Hedge funds currently shorting the stock are losing money every day. And regrettably for them it’s getting worse the longer they hold. I can feel a short squeeze coming.

Why does the short borrow fee matter?

The short borrow fee is an interest that shorts must pay for borrowing AMC shares. And although the interest continues to rise for them, shorts aren’t going down without a fight.

AMC short borrow fee interest

They will hold in hopes to drive AMC’s share price right back down to the floor. However, AMC is trending upwards now and has absolutely no intention of going back down.

Analysts data and AI predictions all point towards a high possibility of a short squeeze. Even Fintel’s short squeeze score has been as high as 80-90% in recent weeks.

AMC Short squeeze Score Fintel

This short borrow fee is going to continue to go up as AMC stock becomes harder to borrow.

For short sellers, a low short borrow fee is in their favor. They would much rather pay the fee and stubbornly continue to hold their positions against retail investors.

But, if the short borrow fee is high enough to hurt the borrower, they will be more inclined to close their positions before losing an excruciating amount of money.

The short sellers conviction is strong, even though they’ve already lost. It’s only a matter of time before they have no other option than to forfeit.

How can retail investors help drive the short borrow fee up?

Retail investors can help drive the short borrow fee up simply by holding their positions.

When AMC squeezes, retail investors will have to continue to hold their position on the way up. Not every short will close their positions immediately.

If we begin to see AMC’s price action rise monumentally, it is important to understand that there’s more potential because not every short seller has closed their position.

We might see AMC drop a little after it peaks. However, if retail investors continue to hold, it’s only going to continue squeezing more and more shorts resulting an further perpetual gains.

Melvin Capital suffered 49% loss 1st quarter

Community, this is massive. Melvin Capital is a hedge fund that has been shorting both AMC and GME stock. These are the people trying to drive the stock to the ground.

Melvin Capital suffered a 49% loss it’s first quarter of 2021, via. Markets Insider. Unfortunately for them, this is only going to get worse.

Retail investors are hodling to the moon. They are not waiting for $100 price action anymore, and some are certainly not waiting for $500+ share price anymore. The Reddit community is set new standards for the AMC’s stock price.

Here’s why this matters:

  • Not only are shorts losing money every day but huge hedge funds are bleeding billions of dollars due to retail investors holding
  • This is a huge win for retail investors – our favorite companies have been saved
  • Unless shorts close their positions, hedge funds will continue to suffer
  • Interest rates will continue to skyrocket for short sellers, enabling them to close their positions sooner than later
  • An AMC short squeeze might be closer than we think

Here’s what retail investors can do:

  1. Continue to hold your positions, it’s free
  2. Buy the dips to counter any short attacks
  3. Share articles on social platforms that can provide value to the community and keep everyone informed
  4. Keep a close eye on the stocks performance so you do not miss the squeeze

Hedge funds are not going to be able to recover from this. Yes they can possible receive help from huge banks but this too will be at a cost.

Furthermore, borrowing money from banks won’t change the fact that shorts still have to cover their positions. Retail investors are buying AMC stock every day. Shorts are fighting a war they cannot win.

Important advisory: I am not a licensed financial advisory. I simply have a passion for finance and writing.

What happens when a short covers their position?

A short position will be profitable if it is covered at a lower price than the initial transaction; it is at a loss if it is covered at a higher price.

In AMC’s case, shorts who drove the price down to $5 but are still holding to-date are at a loss. AMC is currently trading at $44.20 as of September 17th.

When there’s a ton of short covering happening in a particular stock, it will result in a short squeeze.

What is a short squeeze?

What is a short squeeze?

A short squeeze occurs when a stock spikes in price action due to an increase of short-sellers closing out their positions.

We’ve seen a short squeeze happen with both GameStop and Volkswagen. GME topped almost $500 while Volkswagen spiked shy below $1,000 back in 2008.

Short squeezes are massively profitable for retail investors. These one-time phenomena are how people are able to accumulate wealth in such little time.

Read: How high can AMC stock price skyrocket up to?

So, when will AMC shorts cover?

Instead of exiting, short sellers are holding. Some shorts might be waiting for a more favorable price to close their positions.

Another way shorts will be forced to close their positions in AMC is through a margin call. This is when their accounts don’t have the sufficient funds to meet the accounts minimum amount of dollar required. At this point they are forced to liquidate.

Now, because there’s no rule to how long they can hold their positions, they’re in the long game like most retail investors waiting on a short squeeze to happen are.

The good news is that AMC bankruptcy is no longer on the table and Wall Street analysts are even saying the industry is on a solid path to resurgence, via Hollywood Reporter.

As we continue to see a high utilization and the short borrow fee increase, we can only expect shorts will cover sooner than later.

Related: AMC Margin Call: The Squeeze is Inevitable

What percent does the short borrow fee have to be?

AMC’s short borrow fee is currently at 0.90%, via. Stonk-O-Tracker on 9/13. AMC stock is getting harder and harder to borrow. There seems to be some sort of manipulation here. The interest should be much higher.

Short sellers have been borrowing millions of shares to short. It seems they thought AMC’s 500 million share dilution was going to go through. Funny enough Adam Aron, the CEO and President of AMC Entertainment actually scrapped that idea leaving short sellers in a deeper hole.

I personally think retail investors are going to experience the short squeeze of a lifetime. Strap in.

AMC’s price action will continue to go up

Journalists and analysts alike are now claiming AMC to be a big buy. Shorts can continue to hold their loses on paper for months to come, or close their positions while it’s at the current price action.

Closing now is recommended due to an overwhelming amount of attention AMC Entertainment has received.

With new titles coming to AMC movie theaters soon, we’re only going to continue to see a surge in price action due to an increase in the company’s sales revenue.

Even if shorts continue to hold, lenders will eventually run up the interest rate again and force them to cover. If you’re a retail investor reading this article, I’m already celebrating your success. Leave a comment below and let the community know what a short squeeze would mean for you.

AMC is on the ‘Potential Short Squeeze’ list via. Fox Business

fox business amc short squeeze list

In case you missed it, a squeeze is very possible, via FOX Business. All the data at hand point towards the inevitable for both shorts and retail investors.

Retail investors holding AMC stock are going to experience a once in a lifetime opportunity.

Read: What The Fool isn’t telling you about AMC could hurt you

And lastly…

A quick message from Frank Nez

A lot of you have been sharing my posts on Facebook Groups, Reddit, Discord chats, and Twitter. Words can’t explain how grateful I am for you sharing positive and valuable information for new retail investors to look at. So, I published this video to tell you just that. Thank you.

You can support the blog on Patreon.


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46 Comments

  1. Kelly

    So glad I came across this ! I’m a newbie to the stock markets and brought 20 shares of amc back in may off a tip from a friend , I am a carer full time for my mum whom has multiple sclerosis and I would love to take her and my dad on a cruise around the Norwegian fjords along with my kids and husband I’m hoping that amc moons so that I can do this for them . Thankyou for sharing all the information and breaking it down so it’s easier to understand I really hope amc moass soon 🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀

  2. Bernadette

    Just saw on Twitter today the short borrow fee went from 1.0% to 5.6%. Do you know if this is true and if so then this would be great news for us right? Sorry I am new to this and trying to learn, been reading your articles everyday and holding my little 60 shares hoping to change my life.

    • Frank Nez

      Hi Bernadette – yes the short borrow fee went up! This essentially means that short sellers are about to lose a lot more money from the interest alone. This is great news for us because it puts more pressure on them to close their positions.

  3. Howard Nelson

    I appreciate your encouragement as well as learning so much regarding all the manipulation going on that regulators are not regulating in the stock market.
    I use to follow the “Fool” and other stock advisors as I was assuming how respectable they were. How gullible I was until seeing your posts. Now win or lose I’m holding on.
    I got “bit” by a large bank years ago that changed loan applications to place people in a higher interest rate than what qualified for. What has happened to people wanting to have integrity anymore.
    Keep up the good work.
    Howard Nelson

    • Frank Nez

      I appreciate your comment Howard. Justice will be served and the good guys will win. To the moon

  4. Jacob

    I really enjoy your posts. Thanks! Very clear explanation of the subject.

    • Frank Nez

      I appreciate that Jacob – thanks!

  5. Lester91

    When was this article wrote? There are comments from Maine on here?

    • Frank Nez

      Articles are revised from time to time with new and relevant information.

      • Amanda Hogan

        Thank you for updating this article. I’m currently invested in AMC and have been since April. I’ve been buying and holding but was getting concerned with the recent drop and seeing my profit drop thousands of dollars this past week. This article really helped me understand the need to keep holding. I also shared it on the WSB Facebook page because I know there’s a lot of people like me, unsure of what to do.

        • Frank Nez

          I really appreciate that Amanda. I’m sure you helped someone else out who might have been feeling what you were feeling. HODLING strong 💪

  6. Kreese

    Quick question to piggyback off of a concern…let’s say at some point in time, there are only 100 shares left…and I buy them now at $150 per share (no shorts covered yet). No more shares are available to purchase. How do the shorts gets covered where the price of the shares goes up vs just the pocket books of the ones who lent out shares…?

  7. Leaverus

    Question: I keep reading that hedgefunds are “bleeding” money daily on AMC short borrow fee. While that’s no doubt true, surely AMC is not their only investment. I imagine the hedgefunds make enough of a killing on all of their other stock plays that they can keep shorting AMC – and paying the fees – indefinitely until the long “hodlers” give up (which I believe is what the hedgies are hoping for)?

  8. Strade

    SO what happens to the price of AMC when shorts are covered? does it start dropping and thats a sign for retail to exist?

  9. Izzi

    Very good article! Thank you!!

    • Frank Nez

      I appreciate that Izzi – thank you 🤝

  10. Mark A Jauregui

    I found your information very helpful, I will continue to follow you in the future. I wish I would have found this sonner when I first started my trading journey. Keep up the great articles.

    • Frank Nez

      I appreciate you being here Mark. Blessings are coming brother 🤝

  11. Brian H

    Great article. The one question on everyone’s mind is “when is the best time to sell?” because at some point, most retail investors are going to start to cash out to realize the gain. After the shorts are finally covered, the price will ultimately start falling until the stock levels out with the actual business value, correct?

  12. James

    I like your writing style, thanks.

    • Frank Nez

      Thank you, I appreciate that 🤝

  13. Joshua Perkins

    This was a very well written and descriptive article. I’m somewhat new to investment game and took profit from doge and SPCE and bought 70 shares of AMC. This would be a game changer for me as I have 3 of my 5 children on the spectrum and about to get back surgery. I would be able to actually take them on a real vacation and get caught up on bills after being laid off last March and finally finding a job in nov. I’m not hoping for a miracle on this although I am praying for one. I lost 280k in 2008 market crash and was then sued for 7k of management fees I refused to pay. I mean they lost 90% of my 401k while I was overseas and then wanted me to pay and then they got a bailout and most of us were left holding a pile of crap. Anyway, keep up the great work and I look forward to more of your articles.

    • Frank Nez

      Justice will be served Joshua. Thanks for being here 🤝✨

  14. Lasonia R Dalcour

    I love reading your articles. For me the squeeze would be me getting my food business back up and running by purchasing a food trailer and working part time! Retirement and helping my kids and grandkids

    • Frank Nez

      Love it! Thanks for sharing

  15. Arthur Toufayan

    Great article Bryan. Direct and to the point. Glad to see you getting all the “buzz” I will certainly share to educate the ones who don’t really understand what is going on here.

    • Frank Nez

      Thanks brother 🤝

  16. Kommanderson

    Great article, thanks! I have a question for you that I can’t seem to wrap my head around or find an answer to: If hedge funds are truly engaging in a bunch of naked shorting then who is holding all these “synthetic shares?” I’m trying to understand if fake shares are being sold, then who are they being sold to and how will they ultimately be covered?

    How does anyone know if they are holding legitimate shares? Thanks!

    • Dan

      I think they would have to buy legitimate shares from whom ever is willing to sell them back to them (at what ever astronomical market price) to cover their short positions, whether it be retail investors or institutions who bought up shares, etc. Please correct me if I’m wrong, anyone who’s in the know. Relatively new to this game, as well.

      • Frank Nez

        Right on the nail!

  17. Christopher Hillman

    What this could mean to me? Retirement.

  18. Mike

    Thanks for a great article. I believe the squeeze will happen soon. I’m fully invested. Not selling till at least $10k per share.

    • Skrillex

      It could never reach that. It would crash the worlds entire economy. Not to mention, no one in their right mind will hold for a price like that. 800-900 ?? thats more realistic at BEST. More practical price-point? 400-500 IMHO (Not a financial advisor)

      • dvcfamilyJj

        Sir,

        You seem to know the prices and all, can you share with me how you come up with this price target?

        Enquiring minds want to know

        Thank You Good Samaritan.

        Jj

  19. sleepwlkrr

    So even though the big news seems to be GME CEO leaving in July, you think that AMC will actually be the bigger short of the two?

    • bryanfrankieantunez

      I think AMC has the biggest potential of a short squeeze right now

  20. Andrea lynn

    Love your blog!!! It’s really spreading!!! Good for you! You deserve it!!!

  21. @300trades

    Love this article, I have been reading plenty of articles meant to scare and discourage new AMC hodlr’s. They seem written out of desperation, maybe?

    • bryanfrankieantunez

      Don’t worry, I have your back 🤝✨

      • Dave

        Thanks, Frank. What this means is that thousands of ordinary people are finally going to get a seat on the boat, without it leaving them behind. I can’t tell you how happy that makes me. I’ve always wanted to give freely, but never have been in the position. Sharing AMC and articles like this are my way of doing it now.

        What I means to my family is unexplainable. To the moon brotha….to the freaking moon!

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