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Post by james on May 28, 2015 21:58:01 GMT -5
I didn't run all the math, but I think it's $0.17 time value on the put minus $0.02 time value on the call. That leaves $0.15 to handle short interest which at your 2.5% is $0.13 (less since its not a full month), leaving > $0.02 profit per share. With large volume, there is some money to be had.
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Post by gomnkd on May 28, 2015 22:12:31 GMT -5
Folks
This is classic put call parity ratio
Calls + Exercise amount needed = puts + stock
you got Calls - puts - stock = Exercise amount
if you see minus then it is short. long calls with short puts and short stock =
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Post by mbseeking on May 28, 2015 23:12:41 GMT -5
Wow! I just saw that on Stocktwits but my statement this am said 21%....... Its a short war. There must be serious drumbeats coming from across the pond from some Frenchman drinking too much champagne and having loose lips.
Or is there really something on the horizon? Nice block traded posted AH at 16:01 today for 400,000 Shares at 4.22 per share. So this was a trade put together during the day
I explained this on ST, too, but the 400k was a block trade at 15:59, and occurred in relation to yet ANOTHER arbitrage at the $10 strike. there is now over 50,000 options at that strike, all to capture premium with *ZERO* risk, and all which put short term downward pressure on the stock. Im not sure how this is legal, or who is behind it (whether its the MMs making beer money or what), but its mystifying to say the least. How it works: Entity Buys $10 Calls at $0.02 Entity Sells $10 Puts at $4.95 Entity Shorts 400,000 shares What happens: On June OPEX, Entity will have made ~$50,000 risk free while at the same time dumping 400k shares into the market. (whether this is real or paper, I dunno). This is like one of those rubic cubes, take a bit to get your head around. The conventional wisdom is that 'shorts' are bearish, and that the high short interest in MNKD portends the shorts know something more than the Longs. But does this logic simply suggest that much of the shorting in MNKD is simply arbitrage opportunity in the options? The person / entity setting up the transaction seems be be neither bullish nor bearish.. They are done at the outset: they made their money from writing the put, hedged that if <$10 but shorting (and have a little bit of interest to pay until their PUTs expire) , and if > $10 with the $10 call. The person who sold the call is not so bullish, they're selling the call for pennies, but doesn’t have much skin in this either way. What about the person buying the put.. they're paying 4.95 for a soon to expire $10 put ITM put.. Who would do that on so many options? Who would make such an expensive hedge? They only make money if the price is lower than today... so they must be particularly bearish.. .. or someone trying to use supply / demand balance and the infusion of short sales created here to drive the price down? Such a person will buy (an infinite number?) the puts as long as they have a budget for it, knowing that someone is shorting for each put bought. Wow. Is this another piece of the manipulation conspiracy theory. But I walk away from this with one piece of new insight. The huge overhang of shorted shares in MNKD may have very little relationship to the classic thinking that other investors really think the price is going to go down. The people on driving the purchase of the puts (which drives the short creation) could easily not be other investors but rather others with something to lose from the ascent of MNKD. This shorting is not a bearing signal, it may be a scared signal from competitors. Does driving the share price of MNKD down hurt MNKD? I read someone who said it doesn't, but it must if MNKD needs more capital. You'd expect a young company to need coming back to us in the market for capital (dilution). That dilution is much greater if the share price is lower . What stops me (even though I'm long) from entering this transaction , if there are willing PUT buyers? Just the interest rate on the shorts.. If the timeframe is June and it is 24 % , then its only about 4$ on the price of my shorted shares right.. or about 25 cents to fund the shorting from now to June expiry.. vs the 4.xx I made when I sold the PUT.
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Post by mbseeking on May 28, 2015 23:35:11 GMT -5
I explained this on ST, too, but the 400k was a block trade at 15:59, and occurred in relation to yet ANOTHER arbitrage at the $10 strike. there is now over 50,000 options at that strike, all to capture premium with *ZERO* risk, and all which put short term downward pressure on the stock. Im not sure how this is legal, or who is behind it (whether its the MMs making beer money or what), but its mystifying to say the least. How it works: Entity Buys $10 Calls at $0.02 Entity Sells $10 Puts at $4.95 Entity Shorts 400,000 shares What happens: On June OPEX, Entity will have made ~$50,000 risk free while at the same time dumping 400k shares into the market. (whether this is real or paper, I dunno). This is like one of those rubic cubes, take a bit to get your head around. The conventional wisdom is that 'shorts' are bearish, and that the high short interest in MNKD portends the shorts know something more than the Longs. But does this logic simply suggest that much of the shorting in MNKD is simply arbitrage opportunity in the options? The person / entity setting up the transaction seems be be neither bullish nor bearish.. They are done at the outset: they made their money from writing the put, hedged that if <$10 by shorting (and have a little bit of interest to pay until their PUTs expire) , and if > $10 with the $10 call. The person who sold the call is not so bullish, they're selling the call for pennies, but doesn’t have much skin in this either way. What about the person buying the put.. they're paying 4.95 for a soon to expire $10 put ITM put.. Who would do that on so many options? Who would make such an expensive hedge? They only make money if the price is lower than today... so they must be bearish..and with the high purchase price prepared to put in a significant investment. .. or someone trying to use supply / demand balance and the infusion of short sales created here to drive the price down? Such a person will buy (an infinite number?) the puts as long as they have a budget for it, knowing that someone is shorting for each put bought. Wow. Is this another piece of the manipulation conspiracy theory. But I walk away from this with one piece of new insight. The huge overhang of shorted shares in MNKD may have very little relationship to the classic thinking that other investors really think the price is going to go down. The people purchasing of the puts (which drives the short creation) could easily not be other investors but rather others with something to lose from the ascent of MNKD, or already heaving shorted. This shorting is not necessarily a bearish signal, it may be a scared signal from competitors. Does driving the share price of MNKD down hurt MNKD? I read someone who said it doesn't, but it must if MNKD needs more capital. You'd expect a young company to need coming back to us in the market for capital (dilution). That dilution is much greater if the share price is lower . What stops me (even though I'm long) from entering this transaction , if there are willing PUT buyers? Just the interest rate on the shorts.. If the timeframe is June and it is 24 % , then its only about 4% on the price of my shorted shares right.. or about 25 cents to fund the shorting from now to June expiry.. vs the 4.xx I made when I sold the PUT. So my hypothesis is this: In a situation where there is a new product/company threatening large cash flows of other existing product , then short interest in that new company is not necessarily related to negative sentiment on that new product , but rather the level of threat perceived by the other products. If this hypothesis is sound, then the corollary is then the more short interest there is in the new product , then the more threatening it is perceived by parties related to the incumbent product.
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Post by esstan2001 on May 29, 2015 7:34:51 GMT -5
So my hypothesis is this: In a situation where there is a new product/company threatening large cash flows of other existing product , then short interest in that new company is not necessarily related to negative sentiment on that new product , but rather the level of threat perceived by the other products. If this hypothesis is sound, then the corollary is then the more short interest there is in the new product , then the more threatening it is perceived by parties related to the incumbent product. Wow- that is quite a theory... and WAY better than my theory about Dinosaurs. (see Miss Elk / John Cleese of Monty Python) :-)
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Post by eddiemoy on May 29, 2015 9:11:35 GMT -5
i get it now, i been thinking of the short put and short shares as two separate translations to close... it is actually one transaction to close, buy back at $10. now it makes sense...
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Post by ashiwi on May 29, 2015 10:11:04 GMT -5
Fidelity is charging 34.25% to borrow shares.
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Post by kball on May 29, 2015 10:56:45 GMT -5
Fidelity is charging 34.25% to borrow shares. Anyone else wish they could lend out their OTHER STOCKS at rates MannKind is going at? So far none of my others are
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Post by brentie on May 29, 2015 11:08:32 GMT -5
Fidelity is charging 34.25% to borrow shares. Anyone else wish they could lend out their OTHER STOCKS at rates MannKind is going at? So far none of my others are Another of Al's companies(EYES) was paying 26% a couple of months ago. I'm not sure what it's paying now. I'm getting 9 1/4% for my shares of SandRidge Energy.
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Post by kc on May 29, 2015 11:20:34 GMT -5
Fugacity said:
But I walk away from this with one piece of new insight. The huge overhang of shorted shares in MNKD may have very little relationship to the classic thinking that other investors really think the price is going to go down. The people purchasing of the puts (which drives the short creation) could easily not be other investors but rather others with something to lose from the ascent of MNKD, or already heaving shorted. This shorting is not necessarily a bearish signal, it may be a scared signal from competitors.
Does driving the share price of MNKD down hurt MNKD? I read someone who said it doesn't, but it must if MNKD needs more capital. You'd expect a young company to need coming back to us in the market for capital (dilution). That dilution is much greater if the share price is lower .
Two very good points made above. I would guess that is where we see Sanofi step in and buy shares 5% to 10% of MannKind as this would stabilize the capital situation and LAUNCH them to the next level much like what happened to Regeneron in 2005. That stock was battered and left for dead by the shorts much like we see today with MannKind. Watching the trading patterns over the last year one can see when there are some unusal buying patterns happening. This has occurred more so since May 1, 2015. every time the HFT traders have tried to bring the price down somebody is there to buy the shares and move it up. That has really been even more visible since the drive down by GS & B of A with their $2 & $3 comments. I think these calls got the attention of wise savvy investors who have been engaged in other Bio tech stocks that have been driven to the edge like MannKind. Smart investors know how the sausage is made and the games played by the HFT and Hedges against a company that actually has a very bright future ahead of it. While its painful to watch daily as we want the winner now. We all know that in time based on the information we have learned that there is no reason at this time to get nervous. They have not driven the MannKind Groupie to unload their shares at a loss but instead have forced us to double down and buy more like they have.
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Post by ashiwi on May 29, 2015 11:40:58 GMT -5
Must be a lot of shorting this morning as Fidelity again raised the interest rate they charge to borrowers to 36.75%.
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Post by kc on May 29, 2015 11:47:41 GMT -5
The drumbeat is getting louder. There must be news ahead as the rate to borrow keeps going up on the Shorts. Fidelity is now at 36.75% today.
Fidelity is now paying 25% to the lenders.
The perfect storm is upon us.
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Post by ashiwi on May 29, 2015 11:48:35 GMT -5
Fidelity just upped the interest to borrow shares to 25% !!!!!!!! The shorting continues...
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Post by gomnkd on May 29, 2015 13:08:58 GMT -5
Yes i'm seeing 25%, It is now more than EYES's 24.5%.
If MNKD is at current price, shorts are paying more than $200MM/year in interest. I cant wrap my brains around these numbers. No matter what happens, you'll be telling this story to your grand kids (or great grand kids) either about foolishness of owning a biotech or about going short.
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Post by xoxoxoxo on May 29, 2015 18:06:42 GMT -5
Is fidelity's increase in short interest rate a mechanism to force people to cover because fidelity wants to reduce their risk? Or would fidelity just increase margin requirements to cover their risk?
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