zerohedge.com 11 Jun, 2021 19:00 am

"Shot Themselves In The Foot" - AMC 'Messiah' Mudrick Battered By Bad Options Bet

"Shot Themselves In The Foot" - AMC 'Messiah' Mudrick Battered By Bad Options Bet
ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero

On June 1st, Mudrick Capital went from hero to zero in the eyes of Reddit's Wall Street Bets rebels as the hedge fund scooped up $230 million in newly issued stock at an above market price ($27.The derivatives gave buyers the option to buy AMC shares from Mudrick Capital for about $40 (viewed as a seeming improbability when the stock was trading below $10).WSJ reports that Mudrick Capital made a 5% return on the debt it sold but after accounting for its options trade, the fund took a net loss of about 5.Mudrick had sold call options on AMC stock, producing immediate income to offset some potential losses if the theater chain did face problems (or as some might say 'picking up pennies in front a steamroller').

and within minutes of the open the next day had screamed up above $70 - sparking a massive surge in the price of those 'sold' call options, leaving Mudrick with a major loss.The loss on the sold options, it turns out, was big enough to not only erase the gains, it left the previously heroic-looking trader looking like the biggest loser.

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