its a function of the negative rebate on borrows. Right now if you are long MTLQQ and you lend it out the borrower will pay you 99% a year. you can buy a january $2.50 put for $2. so you are protected down to 50c, so you have little risk being long and if there is a short squeeze you sell your long and call back your borrow and you still own the righ tto sell at 50c, this is why MTLQQ trades at 90c.
again, what I don't understand is, that even if there are 100 million shares lent the way reffered above (and protected by march 2.50 puts) that could keep the price at around 0.9, what about the 550 million long shares that are now unencumbered? why are they not being dumped? seems to me 550 shares being dumped would overwhelm any short squeeze.
Last night I gather some statistics, and found that the 2010 puts have been steadily declining, and their volume is little. I think your theory explains some of the volume, but a small portion of it.
I think that the other person that said that "the simplest explanation is usually the right one" might have a point - meaning, it is just uninformed people buying thinking that there will be some value (new GM) - The trade volume and direction is indeed consistent with New GM news.
Oh well, my September puts are probably going to vanish. But at this point I will wait for expiration and let it be what it may. These uniformed people is killing me. My stupidity for not listening to Einstein - "The only thing that is infinite is people's stupidity" . Live and learn.
Sorry to reopen an old thread, but just found this and have a question. I'm not sure I understand this completely, so excuse me if I'm missing something. If the stock is permanently halted by the judge, prior to the expiration of a put option doesn't the stock value go to 0, making the put option pay off at maximum value irregardless of their prior value and irregardless of how many long/short shares exist at the time that trading is halted?