In addition the stock is hard to short (on Reg SHO), so it would be difficult to find shares.
Hard to get your contracts from your public perch at the going rate too. Everybody backs away when an elephant enters the pond. You've been in Mexico...
I also overlooked the fact that if there was a special dividend that could completely disrupt typical expectations.
No indication of a distribution.
I still find it interesting because somebody DID find 100,000 NFLD shares to short (@ $17.08),
How do you know? Only the executing B/D knows and they don't disclose that. The only 100k order executed on the 8th was a market order wash at 14:49:21, 105,000 @ 17.10 0+ chgo
1000 calls to buy (@ $7.10), and 1000 puts to sell (@ $2.95) simultaneously, thereby creating a riskless arb.
One has to leg into at least 2 of these positions by book to get to maximal spread. NFLD is averaging 5 atomic actions/second. Can't try to go market which "simultaneous" implies. A B/D executing on the NAZ has to execute through the firm rep on the options floor. Even with automation this is difficult to do favorably especially if there's a crowd. Also, it isn't prudent to hold 20% of the OI of a series. 1000 is probably the position limit, so this spread has to remain a priori(yuk, no flexibility).
They will profit somewhere around 44,500 dollars, which ain't bad for a days work and a one month payoff.
Money down is something like 1700Gs for non B/Ds. 44.5/1700 = 2.5%.
This sounds "ain't bad" on paper, but until you do these things, you don't know how many flies can get into the soup. The biggest challenge is to execute the position without ending up with a paltry spread which is usually what happens. You might be able to do it favorably from time to time, but to do it regularly, you have to be on the floor. Then one eventually learns to merely maintain a market(sell options to the public and hedge with the common). Stuff like the above are crazy moves and way too complicated or encumbering. What if the stock starts moving fast? Hide in a priori? How about if the stock rises to 35 in ten minutes and you have to post 500Gs maintenance?
Wish I could do that.
No. You're only creating an artificiality. You're falling into the, "the guy is a trader in XYZ so he must know all about where XYZ is going" syndrome. Nobody knows where anything is going. I couldn't make money in the stock market if I knew tomorrow's closing prices, but I can make money because I don't know those prices. This is very difficult to understand although understanding it is akin to recognizing that artificial investment schemes are guaranteed to succeed enough to bust you. |
