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  • sfbizman2002 sfbizman2002 Aug 20, 2009 10:35 AM Flag

    Options only drives price

    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.

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    • the broker gets the 99%, not the long holder

    • 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.

      • 1 Reply to gmhiddenforces
      • 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?

    • Thanks, I understand (partially) now. However, there are only 38million shorts. How can this justifies the volumes we have seen the past 2 3 weeks?