GreenMachineX
Well-known member
So, now that the price hit $40, the brokers should be margin calling the hedge funds which should trigger the squeeze?Ok so Ill just put it as short as possible.
The hedgfunds are shorting AMC.....they betting that AMC is going to drop in price, they borrow a share (possibly even in our own accounts if we dont turn lending off!) in promise to actually buy it and return it where it came from.
If the price of the stock drops, the short seller gets a good deal on the share and when its returned thats where the profit takes place.
If the price of the stock goes up, the short selling now is responsible for a share that is going to cost more money than what he originally borrowed it for.
At some point the short seller needs to get out of the short and cover his short sale. He needs to buy a stock from the market no matter how high the cost and return it.
At some point, the short seller will fall behind and be on a unbalanced account from their brokerage and the brokerage will give the hedgfund (or us if we use a margin account) and give several hours to a few days to cover a "margin call"
So if the hedgfund doesnt cover the "margin call" in time, the hedgfund will start liquidating the entire portfolio in order to buy the shares needed to cover the shorts. Entire accounts can be cleared out, billions and billions of dollars worth.
Thats why holding takes place, these hedgefunds are shorting the stock possible hundreds of millions or billions (this is where fake synthetic shares come in) and they need to cover every one of them until the retail investor (or any shareholder) sells. If nobody sells the price skyrockets until more are available on the market.
So importance of a "margin call?" Well, it forces the hedgefuns to cover their calls and if they dont they get wiped out. This is where the short squeeze happens.
Im not proofreading what I just typed so I hope it makes sense, LOL!