Looking at the ITM calls for June, there appears to be about 20,000 that were listed as Open Interest at the end of the day. Anything we can interpret from this? How many of the 2 million shares would we expect to be sold immediately after exercise (thus driving the price down).
On the other side of the equation, the put ITM Open Interest was at about 2,600. That's a big imbalance next to the calls.
I don't recall where you stated recently about layering in to your position. It was eerie because your example is exactly what I did at the MTGE SPO , when I bought 120 contracts of the 20 Calls on various months. I bought them 20 contracts at a time, seeing how well my bids were accepted and then fishing lower, then higher with 20 more, until the 120 was reached. Anyway, good advice!
You know, on another note, how influential is pinning, to PPS, in low option open interest securities, with high daily security volume?
That is, how many open contracts were there , ITM, this past Friday, 15,000, I can't remember, for June? What were the possible scenarios for disposition? Some folks sold their longs to close(talking Calls), and the other side buying to close, effectively removing these contracts from the open interest pool.
So how many allowed their contracts to be assigned? 50%, to be generous..?
So you have the MM's selling their long hedges in the amount of 750,000 shares(50% of 1.5 million)? That's a stretch, but what real impact is that going to have on a 10 million+ volume day? Maybe this little blip on the radar at the close:
So much for pinning, on a stock like AGNC. Low open interest = low impact on Max Pain.
>>Do you have any guesses? >>
Yes. Look at the last 4EX runs and keep the numbers 4,5,6,8and 10, in mind , for the 5 days , prior to EX, in Volume.
These numbers reflect traders taking profits, but more so , investors seeking the dividend. Shorts do cover, but at what a great time, as the fish gladly take their shares and drive the bid/ share negotiations higher. It is what makes us traders profits. Its why I trade AGNC.
It is predictable. Nothing else is needed. The height of ignorance resides in the minds of those folks who state , with the specious voice of authority , that AGNC is not a good stock to trade. I smile......;-)
I understand your comment. Someone mentioned earlier that maybe a rookie trader initiated the exercises on Wed. due to a misunderstanding of exercise. (We were trying to figure out why the exercises would have been issued Wed with two days left to expiry)
I postulated that there may be fund or brokerage that has a requirement for T+3 for shares in the account by Monday.
Do you have any guesses? I was short ITM calls that had zero time premium in them for a couple weeks. I didn't receive an exercise until Wed. eve. We were trying to connect the dots to the short squeeze on Thu.
I am a little confused by your mention of T+3. I am assuming you are speaking in relation to the Tuesday EX date. It makes me think you are maybe unaware that there is no need to have T+3 for long Call holders to exercise, to receive their dividend before next Tuesday.
A trader can exercise his long Calls, right up to the day before EX, and still receive the dividend. You knew this , right? So what am I missing in your reference to T+3?
This may also lend credence as to why the PPS high can occur before pre ex div. It depends on how the PPS reacts to the short squeeze. It may have been exaggerated this quarter due to ex div being so close to op ex.
Which brings up another topic that I believe may have already been discussed. MMs are pricing in the Sept divvie. Could be another windfall as in March if they move ex div up a few days. Can you say short Sept puts on SPO?
I think this was our situation on Thu. Investors bought to cover (Thu am) the exercises that went out Wed eve as they were faced with a time constraint to do so (postulating the T+3 as reason for timing of the exercises). MM's, with no such time constraint, waited for the short squeeze to finish, and then dumped shares during the afternoon.
This may have just been a market phenomena, rather than a nefarious, preconceived plot. It would be the macro example of your example. Several thousand investors all covered shorts within the same few hours (am), and then MM's dumped hedges, during the afternoon hours.
Not sure if there is anything to this but I will definitely keep an eye on the T+3 exercises for pre ex div this next quarter. On another maniacal run up like that it would be prudent to short or purchase puts. Even if you just held them for a few hours.
OK, fine, any reason why the stock has taken a royal dump this past week? I got off my calls a while back, made a buck or so but had a lot more in actual stock, figuring 24 or more by weekend. Oh well, hard to cry tough times when positive numbers in your account
It's not only exercises that decrease open interest. Any option transaction in which both parties are executing a closing trade decreases it as well. If one party opens while the other closes, OI is unaffected. And if both open, it increases. Nobody has this information for all trades performed during the day until all exchanges report to the OCC at night.