MemberJune 16, 2021 at 1:13 pm
My son got me involved in AMC back in March. I’ve been reading, watching and following but still have a question (as dumb as it may be, please have patience with me) I’m a movie goer and just like the stock, not to mention it’s potential! Here’s the question… when, not if, amc takes off, what’s to guarantee there will be a buyer for that high price?
MemberJune 16, 2021 at 1:28 pm
The institutions shorting the stock will have to buy back shares to cover the shorts they sold. If they get margin called it will initiate automatic buys at whatever price the market asks (aka apes since we hold 80%+ of the shares). I am new and if I misunderstood, I am sure another will set us straight.
MemberJune 16, 2021 at 1:36 pm
Hedgies must cover their short positions, the longer they delay it the more interest they have to pay to the prime brokers, once one throws in the towel and starts buying back the shares from the market (covering their short positions) the price will start rising, this will prompt the others to follow suit as they panic and will not want to pay the higher price, this will cause a short squeeze (love the term) but… if we HOLD…. then supply and demand kicks in! what if there isn’t any shares because the apes are stubborn as hell and refuse to sell? the price goes up and will keep going up until the apes decide to sell.
At the moment they are doing short ladder attacks to drive the price down to get small apes to paper hand…
Just have to hold and wait 🙂
- This reply was modified 1 year, 3 months ago by iMPaCT.
MemberJune 16, 2021 at 1:37 pm
That’s the million dollar question, and it’s a good one.
Short answer, there is no guarantee. Why I say that is because in every transaction there has to be a buyer and a seller. Can’t have one without the other.
In an “affordable” price range, it’s very likely when you’re ready to sell, there will be someone on the other side that wants to buy it and has the funds available.
In the case of shorts covering their position, they have no choice but to buy it at the price you want to sell it at if they want to close that position. The longer they don’t, and the longer the price rises as you hold out, the more expensive it will be for them when the time comes for them to decide to close it out.
Shorters that want to close positions can do so on their own, but if their balance with their banks were to get too low and they margin called and can’t come up with the funds (this is their worst case scenario), then their positions can get liquidated by the computers kicking in and starting the buying process for them.
This is a theoretical example: When the squeeze is underway, to close their position, they will be buying from any of the apes that have decided to sell at a given price. If you sell 1 share at $1,000.00 they now have that share back and return it to the prime broker they borrowed it from (if it wasn’t a synthetic) but deduct $1,000.00 from their funds.
Now, imagine them doing this multiple times for multiple apes throughout any given day as the price rises. Their funds are going to be depleting quickly. There “could” come a time where they spend all their money buying back those shares to close out those short positions. If that happens, they are essentially broke. Now the question is, who buys what other apes still have and want to sell? The answer is anyone (other apes, funds, institutions, etc.) that have the funds available and want to buy it. Hopefully there is a buyer.
There was a video @ReviewDork did about his exit strategy plan where he hinted at this situation. On the rise to the peak of the squeeze, there could be a time where all of the shorters are now out of the game because they are broke. Eventually the squeeze will hit it’s peak and begin a fall. So, there’s the question. Who is on the other side willing and able to do the buying?
Again, this is an oversimplified example just meant to get people thinking and considering a solid exit plan.
MemberJune 16, 2021 at 4:11 pm
I believe this is likely why you are seeing a dip across so many other markets and bonds lately as vulnerable entities are liquidating to keep their cash numbers up. But these same entities are loosing BILLIONS daily. It’s just a waiting game.
Some will get margin called first and that will drive the price a little higher. Then that will cause another tier to be called…and push the price higher. And the avalanche will start.
Smart hedgies, even big ones, may want to buy back early knowing what is to come. But then again these same “smart” people haven’t done so yet so who knows.
And we only know the numbers for reported shorts. The Naked Short pool is potentially the magic sauce for all this but we have no visibility into it. Those shares can’t just be ignored and vanish though. They exist as a contract between entities where one or more chose to sell that same share to multiple people. At some point in that chain there will be someone who REALLY is responsible for the share. If three or thirty fake shares have to be bought back before the real one is truly free and available again that is where the explosion is likely to happen in our favor.
MemberJune 16, 2021 at 4:23 pm
Yep, I agree that it’s likely a factor in why we’ve seen some market pullback in the past few weeks. We also saw it in crypto last month. The speculation was that they rode the rise and then pulled out so they could get more liquidity when there were rumors of margin calls.
Those “smart hedgies” are walking a fine like because they could buy back early to minimize the damage they will take, but that could spark others to do the same, which could trigger more dominoes to fall. They are in a tight space for sure.
Those naked shorts are going to be their undoing for sure. Nobody knows how many are out there but it’s more than they can handle and will be what eventually bankrupts them.
Meanwhile…. just another day in paradise for all the apes 🙂
MemberJune 16, 2021 at 4:30 pm
Thank you,everyone! Your explanations cleared a lot up for me. I did watch that exit plan Review Dork posted (I’ve watched all of the ones related to AMC. Appreciate his straight forward attitude!). It was that exit strategy post that got me thinking about it.
I’ve been wrestling with an exit strategy. Being brand new to the stock market, I have no real expectations or idea just how far this can/will go. (Staying positive here). I’m just your average 120 (literally) stock holder and certainly don’t want to blow the exit for myself or others. My son, who is also relatively new to this, is insisting it has the potential to easily get as high as $1000. That just sounds crazy to me. (Retired first grade teacher that typically thinks along the lines that “if it sounds too good to be true…)
Obviously, not holding anyone to anything!! I get it, the stock market is risky and you never know… but can anyone give me at least a blurry line of where to start thinking exit?
Totally understand if that question crossed a line and you don’t want to answer.
When watching YouTube I don’t even click on the ones that have 100k in their title! I’ve found Trey’s Trades, Matt Kohrs, Roecsh Capital and of course Review Dork to be my most trusted in telling it like it is.
Recommend any others??
Thanks again!! “Hodling”, waiting, watching and learning! The best wishes to everyone!! 🍿
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