[jbp]

How could they lose $7B?

Melvin Capital Recent 13F : https://sec.report/Document/0000905718-20-001111/

It shows they had about $757mm worth puts. Assuming all of that puts are worth zero, their max loss will be $757mm. GME loss would be $55mm.

Hedgefunds don't have to disclose everything? Just trying to understand how did they lose that much.

[tchanglington]

Payoffs for a short position is stock price right now minus stock price at maturity. You can make a synthetic short by longing a put and writing a call at the same strike price and the problem you see here with the short squeeze is really writing the call.

[jbp]

Thank you. But those short calls are not in 13F, so they can selectively disclose?

[gboone]

1 put = 100 shares of the stock. Without knowing the put details it's hard to know the extent of their loss. But your total could be close to what they lost just on GME.

[jbp]

I understand basic options. They listed only long puts in 13F, the max they could lose is the premium they paid. So there must be some other securities that they didn't disclose (mostly short calls as @tchanglington mentioned) which resulted in the loss. I was asking if hedgefunds can disclose selectively? If so that can be exploited in so many ways.

[llampx]

When you buy a put, you are only risking the cost of the put. Unlike a short call or short put.

Yes 1 put contract is technically the right to sell 100 shares at the strike price of the put.