It’s not really public v hedge funds, because the vast majority of both of them will be on the losing side. The reality is that market makers are probably gonna be the only winners here.
If this is successful, hedge funds will suffer, some retail investors will make a huge return, and some other retail investors will suffer losses at the end, much more than otherwise would have. Obviously not ideal, but no situation is perfect. The losses to the retail investors can be minimized if more join in and they take smaller positions on average.
How do market makers get outsized benefits from this? I'm uninformed.
TL;DR Citadel sees Robinhood order flow and can get in front of it, and also bought a chunk of Melvin on the cheap when they got squeezed out of their short position.
How do market makers get outsized benefits from this? I'm uninformed.