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> On Wednesday Melvin said it had exited its bet against GameStop and repositioned its portfolio. Is this true? Louis Rossmann pointed out they would have a hu

> On Wednesday Melvin said it had exited its bet against GameStop and repositioned its portfolio. Is this true? Louis Rossmann pointed out they would have a huge incentive to lie about this (to prompt people to sell and drive prices down).

Mo3 6y ago
No, it's not. According to S3 data they've not. They're running a massive smear compaign to convince the public otherwise.
- dataflow 6y ago
  > According to S3 data they've not. If you have a link you'd be able to share that'd be awesome.
  - brmm 6y ago
    https://isthesqueezesquoze.com/ https://isthesqueezesquoze.com/ See the links near bottom of the page, some are subscriptions though
- gruez 6y ago
  >According to S3 data they've not. And I suppose that's because short interest isn't going down? Aside from the fact that other short-interest sources (all unofficial, by the way) shows that short interest cooled down last week. it also ignores the fact that it's possible to close short positions by transferring to another fund. I'd imagine there's plenty of funds willing to short GME at $300.
  - kreeben 6y ago
    >> I'd imagine there's plenty of funds willing to short GME at $300 Plenty? What type of mathematical model would support a move like that? Are hedge funds predicting a government bailout? Or are they certain retailers will close on Monday?
    - gruez 6y ago
      >Plenty? What type of mathematical model would support a move like that? Do you really need a mathematical proof of this? If a stock is $30 and you think the FMV is actually $20. Then you'd expect to make $10 from shorting it. If it's at $300 you'd expect to make $280. So the higher the price, the more money you expect to make from it, and the more tempting it is. >Are hedge funds predicting a government bailout? Or are they certain retailers will close on Monday? No not really, a sibling comment explains it better than I can: https://news.ycombinator.com/item?id=25984493 https://news.ycombinator.com/item?id=25984493
- dcolkitt 6y ago
  Incorrect. S3 only shows aggregate short interest. That data does not in anyway indicate Melvin's specific position. Almost certainly what happened is that while Melvin was unwinding other hedge funds were opening up new short positions at the current extremely dislocated prices. And this is exactly why WSB's short squeeze theory is doomed to failure. It's not like once you beat Melvin that all of Wall Street just declares "okay, Gamestop is officially a $30 billion company and we will never bet against it again." The more WSB drives up the price, the more lucrative a short position becomes in the long run. And the more it attracts even more hedge funds into shorting. It's like a video game that has no ending, just the levels get harder and harder. The difference with any traditional short squeeze is that there's always a catalyst that prevents the shorts from keeping their positions open. In the classic case it's a third party buying up a bunch of shares, then recalling them from the stock borrow market. In the Volkswagen squeeze it was the expiration of derivatives tied to Porsche's attempted acquisition of the company. WSB's original theory was that the gamma squeeze from options expiration would be the catalyst. But as of last Monday, those options were all deep in the money with crazy high implied vols. There's no gamma left to squeeze. WSB no longer even has a thesis, just memes. With $3 trillion of AUM in the hedge fund industry, the only feasible end game is if WSB makes Gamestop the most valuable company in the world and criples the global financial system. Is it possible? Sure, lots of things are possible... I wouldn't bet on them. I can virtually guarantee you that there won't be any meaningful short squeeze at current levels. The share price will be well below $100, before the short interest falls below 100%.
  - emanuelsaringan 6y ago
    This is just circular reasoning. More shorting -> fuels retail traders buying -> leads to more shorting -> leads to more buying. This can go on until GME becomes part of S&P 500. At this point WSB doesn't even need to do anything because pension funds, and other institutional investors etc. will end up buying GME.
  - nrmitchi 6y ago
    > only feasible end game is if WSB makes Gamestop the most valuable company in the world and criples the global financial system. Is it possible? Sure, lots of things are possible... I wouldn't bet on them Another good reason to assume this wouldn't happen: the existing system will not let it. You may argue that that is "changing the rules" or "cheating" or "being on the institutions side!", and you're right, but I would assume that the government forces all GME positions to be liquidated and halts all trading, no matter no many retail and/or institutional traders get upset by it, before allowing the collapse of the global financial system (again). No matter what game you're playing, there are always "superior" rules, that are not written down. No matter what game you're playing, one of the over-arching rules is "no crippling the global financial system".
- qeternity 6y ago
  Short interest down massively from Friday. Equities don’t settle instantly. Tomorrow will be bloody.
  - Uehreka 6y ago
    I kept seeing people saying Friday would be the reckoning and offering various contradictory reasons that orbited around “the margin call expires and they have to buy”. Nobody could say what time the margin call would “expire” or provide a source explaining how that worked, and when none of those things happened and the stock rose back to 300-ish and closed, everyone just updated their takes to Monday instead. How do we know this won’t just sputter for another week or two and then end in the most anticlimactic way possible?
    - qeternity 6y ago
      > “the margin call expires and they have to buy” Not sure what you mean by this, but I presume you're referring to options expiration. Some people, with a tenuous/non existent grasp of this stuff were running around screaming "naked shorts" and thinking that Citadel and other market makers were going to need to buy massive amounts of underlying to deliver against their short calls. But the entire reason a gamma squeeze works is because the MMs are buying in their delta as it moves against them. So that was never a very good theory. Opex also means that a lot of gamma expired, which would offset whatever opex buying actually needed to be done. > everyone just updated their takes to Monday instead The average Robinhooder/Twitter jockey perhaps. What actually happened is that S3 Partners, who do predictive analytics on short interest (which are officially released fairly sporadically) have suggested that their early take on Thu/Fri trading is that shorts covered a fairly large amount. Given that this whole squeeze is a momentum game requiring coordination and confidence amongst the longs, taking out a huge chunk of the fuel would likely impact the confidence of a long, which in turn ruins the coordination. > How do we know this won’t just sputter for another week or two and then end in the most anticlimactic way possible? We don't, it could sputter on. It could go up, down, or sideways. GME could be permanently a $300 company for all we know. Trades don't deal in absolutes, but rather probabilities.
- vmception 6y ago
  where does S3 get its data from? equities short interest from other sources is only updated twice a month.
warent 6y ago
I think the smell test is when the media stops slandering the people causing the GME inflation. The tone of outrage comes from the hedge funds losing money
friedman23 6y ago
It would be illegal for them to lie about it.
- deleted 6y ago
  [deleted]
- bluedevil2k 6y ago
  The fine would be cheaper than their continued losses.
  - m3kw9 6y ago
    Fine and lawsuits and reputation damage. Probably put them under.
fractionalhare 6y ago
The arguments that Melvin lied about closing their position are as follows: 1. Short interest on GME is still high, even after they claimed to have closed their short position. 2. They have a "huge incentive" to lie about this, because people believe it would encourage a selloff. That is the entirety of the evidence. It is uncritical despite the fact that it gets frenetically repeated on reddit. Here is the evidence which suggests they didn't lie: 1. That first argument doesn't prove what people believe it does. First, short interest is only officially reported twice monthly, and most cited data is out of date or estimated. More importantly, short interest is an aggregate measure which does not track specific positions. It only tracks all positions together. Other firms which haven't been burned by the price increase have opened new positions, hoping to short from the top tick (or thereabouts). 2. The second argument is reddit cargo culting "game theory", and it violates both logic and Occam's Razor. If you're a fund manager who lies to the public about closing a highly volatile position that could bankrupt you, you are facing securities fraud and violation of fiduciary duty, respectively. Either of those will pierce the veil of your firm and leave your personal assets liable for reclamation by the SEC and/or angry investors. You will be sued. You will lose. Moreover, the "incentive" of this move is that you might prompt a selloff and get to keep your short position. It strains credulity to think someone would make such an uncertain bet with a huge psychological component when their firm is literally on the line. If you're wrong, your firm is dead and all of your personal assets are up for seizure in the ensuing fallout for the aforementioned reasons. The alternative is that you just close the position, don't lie about it, and your firm survives and you just have a bad year. You are personally unscathed as the fund manager. And since you've had historically excellent returns and this was a 3 or 4 sigma event, long term you'll probably be fine. You'll have a new signal to incorporate into your portfolio risk management and you'll move on.
- flunhat 6y ago
  Thank you 1000x for writing this. I thought I was going insane reading all the comments like “Melvin publicly said they closed their short position, which is suspicious because they said it publicly (if they said nothing, you all would still find it suspicious!), so they are probably lying about closing their short position”
bigpumpkin 6y ago
Exited its bet doesn't preclude it from re-entering into a similar one a day later

Mo3 6y ago

No, it's not. According to S3 data they've not. They're running a massive smear compaign to convince the public otherwise.

dataflow 6y ago
> According to S3 data they've not. If you have a link you'd be able to share that'd be awesome.
- brmm 6y ago
  https://isthesqueezesquoze.com/ https://isthesqueezesquoze.com/ See the links near bottom of the page, some are subscriptions though
gruez 6y ago
>According to S3 data they've not. And I suppose that's because short interest isn't going down? Aside from the fact that other short-interest sources (all unofficial, by the way) shows that short interest cooled down last week. it also ignores the fact that it's possible to close short positions by transferring to another fund. I'd imagine there's plenty of funds willing to short GME at $300.
- kreeben 6y ago
  >> I'd imagine there's plenty of funds willing to short GME at $300 Plenty? What type of mathematical model would support a move like that? Are hedge funds predicting a government bailout? Or are they certain retailers will close on Monday?
  - gruez 6y ago
    >Plenty? What type of mathematical model would support a move like that? Do you really need a mathematical proof of this? If a stock is $30 and you think the FMV is actually $20. Then you'd expect to make $10 from shorting it. If it's at $300 you'd expect to make $280. So the higher the price, the more money you expect to make from it, and the more tempting it is. >Are hedge funds predicting a government bailout? Or are they certain retailers will close on Monday? No not really, a sibling comment explains it better than I can: https://news.ycombinator.com/item?id=25984493 https://news.ycombinator.com/item?id=25984493
dcolkitt 6y ago
Incorrect. S3 only shows aggregate short interest. That data does not in anyway indicate Melvin's specific position. Almost certainly what happened is that while Melvin was unwinding other hedge funds were opening up new short positions at the current extremely dislocated prices. And this is exactly why WSB's short squeeze theory is doomed to failure. It's not like once you beat Melvin that all of Wall Street just declares "okay, Gamestop is officially a $30 billion company and we will never bet against it again." The more WSB drives up the price, the more lucrative a short position becomes in the long run. And the more it attracts even more hedge funds into shorting. It's like a video game that has no ending, just the levels get harder and harder. The difference with any traditional short squeeze is that there's always a catalyst that prevents the shorts from keeping their positions open. In the classic case it's a third party buying up a bunch of shares, then recalling them from the stock borrow market. In the Volkswagen squeeze it was the expiration of derivatives tied to Porsche's attempted acquisition of the company. WSB's original theory was that the gamma squeeze from options expiration would be the catalyst. But as of last Monday, those options were all deep in the money with crazy high implied vols. There's no gamma left to squeeze. WSB no longer even has a thesis, just memes. With $3 trillion of AUM in the hedge fund industry, the only feasible end game is if WSB makes Gamestop the most valuable company in the world and criples the global financial system. Is it possible? Sure, lots of things are possible... I wouldn't bet on them. I can virtually guarantee you that there won't be any meaningful short squeeze at current levels. The share price will be well below $100, before the short interest falls below 100%.
- emanuelsaringan 6y ago
  This is just circular reasoning. More shorting -> fuels retail traders buying -> leads to more shorting -> leads to more buying. This can go on until GME becomes part of S&P 500. At this point WSB doesn't even need to do anything because pension funds, and other institutional investors etc. will end up buying GME.
- nrmitchi 6y ago
  > only feasible end game is if WSB makes Gamestop the most valuable company in the world and criples the global financial system. Is it possible? Sure, lots of things are possible... I wouldn't bet on them Another good reason to assume this wouldn't happen: the existing system will not let it. You may argue that that is "changing the rules" or "cheating" or "being on the institutions side!", and you're right, but I would assume that the government forces all GME positions to be liquidated and halts all trading, no matter no many retail and/or institutional traders get upset by it, before allowing the collapse of the global financial system (again). No matter what game you're playing, there are always "superior" rules, that are not written down. No matter what game you're playing, one of the over-arching rules is "no crippling the global financial system".
qeternity 6y ago
Short interest down massively from Friday. Equities don’t settle instantly. Tomorrow will be bloody.
- Uehreka 6y ago
  I kept seeing people saying Friday would be the reckoning and offering various contradictory reasons that orbited around “the margin call expires and they have to buy”. Nobody could say what time the margin call would “expire” or provide a source explaining how that worked, and when none of those things happened and the stock rose back to 300-ish and closed, everyone just updated their takes to Monday instead. How do we know this won’t just sputter for another week or two and then end in the most anticlimactic way possible?
  - qeternity 6y ago
    > “the margin call expires and they have to buy” Not sure what you mean by this, but I presume you're referring to options expiration. Some people, with a tenuous/non existent grasp of this stuff were running around screaming "naked shorts" and thinking that Citadel and other market makers were going to need to buy massive amounts of underlying to deliver against their short calls. But the entire reason a gamma squeeze works is because the MMs are buying in their delta as it moves against them. So that was never a very good theory. Opex also means that a lot of gamma expired, which would offset whatever opex buying actually needed to be done. > everyone just updated their takes to Monday instead The average Robinhooder/Twitter jockey perhaps. What actually happened is that S3 Partners, who do predictive analytics on short interest (which are officially released fairly sporadically) have suggested that their early take on Thu/Fri trading is that shorts covered a fairly large amount. Given that this whole squeeze is a momentum game requiring coordination and confidence amongst the longs, taking out a huge chunk of the fuel would likely impact the confidence of a long, which in turn ruins the coordination. > How do we know this won’t just sputter for another week or two and then end in the most anticlimactic way possible? We don't, it could sputter on. It could go up, down, or sideways. GME could be permanently a $300 company for all we know. Trades don't deal in absolutes, but rather probabilities.
vmception 6y ago
where does S3 get its data from? equities short interest from other sources is only updated twice a month.

warent 6y ago

I think the smell test is when the media stops slandering the people causing the GME inflation. The tone of outrage comes from the hedge funds losing money

friedman23 6y ago

It would be illegal for them to lie about it.

deleted 6y ago
[deleted]
bluedevil2k 6y ago
The fine would be cheaper than their continued losses.
- m3kw9 6y ago
  Fine and lawsuits and reputation damage. Probably put them under.

fractionalhare 6y ago

The arguments that Melvin lied about closing their position are as follows: 1. Short interest on GME is still high, even after they claimed to have closed their short position. 2. They have a "huge incentive" to lie about this, because people believe it would encourage a selloff. That is the entirety of the evidence. It is uncritical despite the fact that it gets frenetically repeated on reddit. Here is the evidence which suggests they didn't lie: 1. That first argument doesn't prove what people believe it does. First, short interest is only officially reported twice monthly, and most cited data is out of date or estimated. More importantly, short interest is an aggregate measure which does not track specific positions. It only tracks all positions together. Other firms which haven't been burned by the price increase have opened new positions, hoping to short from the top tick (or thereabouts). 2. The second argument is reddit cargo culting "game theory", and it violates both logic and Occam's Razor. If you're a fund manager who lies to the public about closing a highly volatile position that could bankrupt you, you are facing securities fraud and violation of fiduciary duty, respectively. Either of those will pierce the veil of your firm and leave your personal assets liable for reclamation by the SEC and/or angry investors. You will be sued. You will lose. Moreover, the "incentive" of this move is that you might prompt a selloff and get to keep your short position. It strains credulity to think someone would make such an uncertain bet with a huge psychological component when their firm is literally on the line. If you're wrong, your firm is dead and all of your personal assets are up for seizure in the ensuing fallout for the aforementioned reasons. The alternative is that you just close the position, don't lie about it, and your firm survives and you just have a bad year. You are personally unscathed as the fund manager. And since you've had historically excellent returns and this was a 3 or 4 sigma event, long term you'll probably be fine. You'll have a new signal to incorporate into your portfolio risk management and you'll move on.

flunhat 6y ago
Thank you 1000x for writing this. I thought I was going insane reading all the comments like “Melvin publicly said they closed their short position, which is suspicious because they said it publicly (if they said nothing, you all would still find it suspicious!), so they are probably lying about closing their short position”

bigpumpkin 6y ago

Exited its bet doesn't preclude it from re-entering into a similar one a day later