Welcome back to the channel everyone, hedge funds are illegally or synthetically shorting amc through the iwm etf. So today i'm going to break down just how they're doing it trust me guys. You do not want to miss this video, so stay tuned and let's make some money, but guys before i dive into the video. I just want to give a massive shout out to the 1400 of you that have currently ding that notification bell, because you guys are always the first to watch a new video as soon as it's released so guys be sure to drop a like down below subscribe To the channel and ding that notification bell, so that you don't miss another video just like this one, and now i want to dive straight in with the key information, so russell 2000 traders place bearish bets via iwm etf.

The i shares russell 2000, etf or iwm has been trading sideways for the better part of the last six months between 211 and its all-time high of 234.53. From march, the 15th iwm is compromised with the 2000 smallest companies that make up the russell 3000 and is generally regarded as a bellwether of the us economy. Iwm is the largest russell 2000 etf and holds 66.87 billion in assets. The top five largest equities in iwm include amc, entertainment holdings, intellia, therapeutics, arrowhead, pharmaceuticals, affinitive and crux.

As we can see, there was a number of bearish trades, many of which were exceeding a hundred thousand dollars and all of them occurred at a very similar time. But how exactly does that impact the amc stock? Well short selling etfs what it does, how it affects the underlying stocks and how reddit often gets it wrong? There's been a lot written lately on short selling etfs i've seen a lot of misinformation about this, and i want to clarify how short selling etfs affects the underlying stocks. Although there is evidence that at least some etf seem to have been shorted to drive down the price of gamestop, but it's also obviously applicable to amc, it's important to know that shorting etf is not inherently bad etfs commonly have exorbitantly high short interest due to creation And redemption mechanisms and shorting etfs has beneficial effects on the market, such as increasing liquidity in the underlying stocks. However, buying and selling etfs does have an effect on the underlying stocks.

How else could it influence liquidity and this effect can be exploited to synthetically short, a stock? At this point, we've all heard the claim that a stock within an etf can be synthetically shorted by selling an etf short and then taking a long position in the remainder of the underlying, i guess, the underlying stock. If a manager wants to short a single stock, but they don't want to go to the extent of borrowing and disclosing the short, they would short an etf that holds the stock and simultaneously buy long, the underlying holdings that they don't want to shore. And that's exactly. What's going on at the moment, these hedge funds want the short amc, but they can't because they can't locate the stock, so they're shorting the iwm etf, because that etf's number one holdings is amc, as the article says, shorting, an etf and going along on its other Holdings can serve as a cloaking device shorting a specific stock.

How exactly does this happen, though? Does this short actually affect the underlying stock, or do you simply profit if the stock decreases in value? The answers to those questions are the subject of this post. When someone with a lot of money, let's call them hedges approaches a prime broker with a request to borrow shares at an etf. The broker can go and buy the underlying stocks to create the shares of the etf, to lend to the hedgie. Importantly, in doing so, that broker is also legally allowed to short, sell the underlying stocks to offset its exposure, since this is market-making activity.

All of that is fine and it wouldn't affect the underlying liquidity, because the shares were bought to create the etf and sold to offset the exposure and then, when the borrowed etf shares returned to the broker, the broker would destroy the created etf shares. However, if hedgie takes a long position in all, but one of the stocks underlying the etf and simultaneously sells the shares of the etf short hedgie has now divorced the net asset value of the etf from the stocks underlying in the etf. In other words, the value of all the stocks, but one in the etf went up, but the value of the etf went down, in other words, by borrowing the etf or shorting, the etf and going along on all. But one underlying stock.

But hedgy has effectively sold that underlying stock short and therefore these hedge funds could just be buying the stocks inside the russell 2000, but shorting that iwm russell 2000, thereby effectively just shorting that amc stock synthetically through this process hedgy can dramatically reduce the price of the Stock, he wants to short without the stock appearing shorted at all. That stock would not be short sold according to finra or appear on any threshold securities list. This is indeed quite a cloaking device for shorting a stock. Does that mean the hedgie can't be squeezed, though? No, the hedgy is still short, the etf and as the value of its underlyings increases.

So does the hedges margin requirement for maintaining that short position? Eventually, hedgie can be margin called to return. The etf, therefore, even though the hedgy is not directly shorting amc as they're synthetically, shorting it by shorting the iwm, if the iwm increases, which it would do if amc increases, because amc is the number one holdings then effectively, the hedgie could still be squeezed and margin Called to make this abundantly clear people who shorted, gamestop or amc indirectly through xrt or iwm, will still have to cover their shares in amc. So, therefore, even though the hedge funds might be shorting, amc, synthetically and not actually showing up on the threshold securities list or in their holdings, they're still just digging themselves a worse hole. I also wanted to recap on the bot updates, and it now looks like bots.

Are even turning to the facebook wall street bets page, as you can see, there's six posts here that are saying exactly the same thing, all saying that the person lost everything and they can't believe they trusted the wall street bets community again. This is clearly bot behavior, because it's a direct copy and paste between six individually separate accounts, one supposedly even coming directly from the wall street bets page itself. Clearly, the hedges are getting desperate and are doing absolutely anything they can to push down the price of amc. Even synthetically shorting it through the iwm etf and making bot comments in the dozens guys, if you haven't already i'd, really consider joining the patreon and the private discord linked in the description below so that you can discuss amc and get news and due diligence updates before I even make a video and if you want to pick up some shares in amc, but you haven't even yet signed up to a trading platform yet be sure to check out the links in the description to weibull in the us and free trade in the uk.

You can get some free shares with very low minimum deposits and, as always guys, if you enjoyed this video, be sure to check out some of my others. Alternatively, subscribe to the channel and ding that notification bell, because that way, you'll be alerted. When i upload a new video cheers.