A hedge fund lost 10% in just a few days after a sudden spike in AMC stock derailed an options trade, new report says
[A hedge fund lost 10% in just a few days after a sudden spike in AMC stock derailed an options trade, new report says | Markets Insider (businessinsider.com)](https://markets.businessinsider.com/news/stocks/mudrick-capital-lost-10-percent-amc-stock-spike-options-wsj-2021-6-1030516964)
[Natasha Dailey](https://markets.businessinsider.com/author/natasha-dailey)
Jun. 11, 2021, 04:45 PM
* **Hedge fund Mudrick Capital lost 10% in just a few days amid a recent surge in AMC Entertainment's stock price,** [**the Wall Street Journal reported**](https://www.wsj.com/articles/amc-bet-by-hedge-fund-unravels-thanks-to-meme-stock-traders-11623431320)**.**
* **The fund announced earlier this month that it purchased millions of AMC shares and sold them at a profit shortly after.**
* **The fund is still up 12% year-to-date, while shares of AMC are up more than 2,000%**
Hedge fund Mudrick Capital lost 10% in just a few days of trading as shares of meme stock AMC Entertainment spiked to record highs, [**the Wall Street Journal reported**](https://www.wsj.com/articles/amc-bet-by-hedge-fund-unravels-thanks-to-meme-stock-traders-11623431320), citing people familiar with the matter.
The losses were driven by call options sold by firm founder Jason Mudrick, according to the WSJ. The position, intended to serve as a downside hedge, ended up backfiring as the stock surged too much, too fast.
The runaway share spike occurred on June 2, when AMC shares rose as much as 127%, to $72.62, well beyond the strike price of $40 for Mudrick's options.
Just one day prior, Mudrick had [**disclosed a $230.5 million purchase of new AMC stock**](https://markets.businessinsider.com/news/stocks/amc-stock-price-230-million-stock-sale-mudrick-reddit-wallstreetbets-2021-6-1030482628?utm_source=markets&utm_medium=ingest), then immediately sold those shares at a profit, according to a Bloomberg report. Despite the success of that leg of the overall AMC trade, Mudrick's calls on the stock were still held short, leaving them vulnerable to the June 2 surge, the WSJ found.
Mudrick did close out all options and debt positions on June 2, albeit too late to avoid the squeeze. While the fund did earn a roughly 5% return on the debt, it ended up absorbing a net loss of 5.4% because of the options trade.
Though the fund took a hit amid the surge, it's still up about 12% for the year, the Journal said. Meanwhile, AMC, the world's largest movie theater chain, is up more than 2,000% year-to-date.
Retail traders have been dealing blows to short sellers and hedge funds this year as they've poured into stocks with high short interest rates in order to force a short squeeze. Earlier this year, investors on Reddit's Wall Street Bets led a share price surge in GameStop, which caused short sellers to lose billions.
Amid the renewed meme-stock interest in recent weeks, short sellers have continued to lose money in retail-trader favorites like AMC and GameStop. The meme stock trade has [**scared off many short sellers**](https://www.businessinsider.com/reddit-traders-scared-short-sellers-away-amid-meme-stock-squeezes-2021-6?utm_source=markets&utm_medium=ingest) from heavily betting against certain stocks.
https://www.reddit.com/r/StockMarket/comments/ny73hu/a_hedge_fund_lost_10_in_just_a_few_days_after_a/
