Why open a 7mm naked short on a $1.75 share stock?
How about some answers that don't include "bcuz it sux!!! bwahahaha"
1. Because someone thinks it will go bankrupt, but they're trying to gain $1.75 per share minus (substantial) carrying costs 2. Because someone like a Big Tobacco company wants to bury the price in case they wind up having to make a buyout offer to Star in case they lose a patent case 3. Because they've gone long options and are strangling the stock by going short
I don't think it is reason 1 because of the high risk for a small return. I don't believe it is 2 either because tobacco companies would not want the risk of getting caught at stock manipulation, again not worth the risk for whatever return it would provide.
That leaves 3. There is a lot of option trading on such a small company. Also, yesterday's trading was bizarre. The speed and volume of the drop was dramatic. While the rise was driven by news, someone sold a lot of shares to stop the news bumping the stock up. There is a lot of open interest in $2 calls, maybe someone really wants them to expire worthless? Or wants to pick up a bunch more before something happens?
"While the rise was driven by news, someone sold a lot of shares to stop the news bumping the stock up."
Don't know about anything else, but the stock stopped going up when the people who were buying finally realized that the "news" was a non-event ... a forgone conclusion on a procedural matter. But it shows how many people are "watching", because most of us knew it was a non-event.