lml, humm... all very good questions and its difficult to get a clear picture. Here's my take so far:
1)The short position is not really as large as its seems. When the company issued its convertible debentures late last fall it opened up the likelyhood that the buyers of these would short the stock to lock in their return. I believe this happened its very common.
2)I don't see how the MM's make out regarding these call positions. The MM's in the stock also make the options, so there isn't much point in buying options from themselves. Now its possible that that bought these as covered calls that someone else wrote to cover short exposure. But, this doesn't make much sense to me either. First, the size of these positions is much larger than historic open option positions for TKLC. So, it would have required someone or several large shareholders to decide to write an unusually large number of covered calls just at the time that the MM's needed them to hedge their short positions. Possible, but, seems unlikely.
3)Since you were able to figure out that these positions were probably opened several months ago, why weren't they liquidated or dramatically reduced when the stock went into the 50's? The call position was worth something like $30M at that point. Moreover, as the stock started to sink and went all the way down to the low $30's why wasn't it reduced or liquidated on the way down? Of course, I don't know. Seems odd, though.
4)What is interesting is that it seems that these calls were opened a month or so before the announcement about the relationship with CSCO. Might be a connection there. Why have they stayed open? Maybe more to come. I would suppose that there is even a possibility that CSCO opened these positions, though, I would have to believe that this would be an SEC violation. I'm no expert on that, though.
So, bottom line is that at this point, I have to see this as bullish for the stock. It will be interesting to see what happens as the expiration date gets closer. If these positions stay open then there is really something afoot, since the holders are taking major chances with big $$$.
WTS |
