Whew. Nice rebound. I feel better today. I am also relieved that my alias was not implicated in the Dixie Chick affair...
Great analysis, Idaho, as usual. And thank you for your Level II diligence. I would like to upgrade my account with you... if only you had one. However, "conspiracy" is too strong a word. The techniques are all-too-commonplace. Mundane, really. And freely documented. I suspect there is a lot more that is undocumented. Esoteric. To me, the opportunities seem to be wide open.
Back when IMMU was between $4.50 and $5.00, I noticed 18,000 Jan/Feb puts for $2.50. That's a sh*tload of puts for this stock, people, and it automatically represents 1.8 million shares short. Why? O.K. Let's forget that 1.8 million derivatives were hoping for IMMU to plunge below $2.50. They would make a killing, but only if the stock fell SUBSTANTIALLY below $2.50. From $5! IMMU really has to penetrate that mark before Jan/Feb for anyone to make money.
No, that makes no sense. That was not a good bet, short term. Moreover, the far majority of options players are traders. They do not wait for the strike price ($2.50). They buy and sell. Instead, they haven't budged. In fact, those contracts have now increased to 1.9 million shares.
It gets better. Even after the plunge and the resultant volatility-- which SHOULD spike the price of those puts well beyond the profit side-- those Jan/Feb puts today are not worth much more than they paid for them. Conversely, when IMMU spiked to $4-7, the call premiums were off the charts. On the way up AND the way down. I have only recently found them affordable.
I'm not an expert of Black-Scholes, but again, this makes no sense.
Here is what makes sense. Those puts are only there to launder some naked shorts. As in "married puts." Or something more cutting edge. When an options maker sells puts, he AUTOMATICALLY sells short an equal number of shares to hedge his risk. And in the past, those naked shorts could literally be doubled and tripled via put options, much like fractional banking. Regulation SHO was supposed to be a deterrent.
Ha! As I have posted before, regardless of Regulation SHO, a large bulk of short activity remains undocumented, it would seem. The only explanation is that it is being routed through "unregulated" *exchanges:
Message 26044632
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* As if there is any regulation in the "regulated" markets. |
