Someone has put some sort of play on the August 40 calls and puts. And by "sort" I mean gigundous. 10,000 contracts.
Impossible to tell what it is, though. Straddle, short straddle, synthetic short or long.
Impossible even to tell when the position first materialized. Best I can tell he either bought or sold the Puts on 7/13 for a premium of 5.43, and then made a buy of the calls yesterday for 0.04 each.
Weak guess: he bought the Puts, hoping to make money on the SPO, didn't make enough and didn't close out (I mean, didn't he notice the spread and that there was nobody else in the market for that strike?). So now he's trying to recoup for cheap. But by buying an option with a delta of 0.00 he's going to have a hard time paying for the calls, let alone the Puts.
Whatever his plan, he's put at least $5.47 million on the line, may have taken nearly $30 million in risk (if those Puts are short not long), and is now making very poor choices.
"is he right about the pps going to $40?"
What makes you think he expects the pps to go to 40?
My theory, as I said in the earlier comment, is that those strike 40 calls were a smokescreen to make the whole position (calls+puts) seem neutral when in fact it was a downside bet. He know from the start that the calls were not going to make money.
(Now if the pps goes above 40 by op-ex next week, I will eat my hat).
sounds like our hft group in texas is trying to make some side bets that did not work too well. hard to resist making big bets when you assume you know more than the "market." stock manipulation works in the very short run but usually does not last more than an hour or so. maybe he/she got distracted?
I said "legal defense" on the possibility that whoever did this trade had advance knowledge that a flash crash would occur before op-ex.
I have no evidence that this is so, but this option trade, as well as the flash crash, were both carried out by very big boys.
Yes, I just confirmed also that there was no closing trade recorded since this position was opened. I think your theory of what happened is correct.
Also interesting is that the same person seems to have traded (bought, presumably) 10,000 strike 40 calls at the same time. These are still in the open interest.
Which is possibly a little fishy. Since he probably didn't expect the 40 calls to become ITM in just a month or so, I wonder if those were purchased as a possible legal defense, i.e. to claim that he really did not make a direction bet (which he obviously did). But that's just a guess. Can't tell what really happened here.
Oh. Duh. CBOE says Last sale 5.43, which was his entry. Open interest disappeared without an intervening transaction?
Exercise, exercise, come on everybody get your exercise.
So he did exacerbate the problem by dumping that load on his poor MM counterparty, who got assigned every ever-lovin' share since, really, there was nobody else within a mile of those strikes.
So now the question is how the MM handled them. Did he turn them loose on the book, or did he do the smart thing and open a short position when this guy opened the Puts against him, and just close it at the same time he disposed of the assigned shares?
Could this be a hedge on long shares from someone unsure of PPS going forward. Not looking for share appreciation, just divvie yield. Not even looking for income from options as they were not trying to grab time premium.
>>Not looking for share appreciation, just divvie yield>>
Nope..Aug OPEX, no protection against EX.
MM just playing. No commissions. Shorted the Puts, Long the Calls. Already up $90,000, on a 9 cent move. Wasn't counting on the SPO, and bit the bullet, now on the other side. 35 by Aug OPEX nets $530,000. 36 by OPEX nets $1,530,000.
Must be tough....;-)
I'm seeing 10k Sept 40 puts near market open Jul 13. I also see 10k Aug 40 puts near market close Jul 13.
As of today, open interest for Sept 40 put is gone, August is still 10k.
Were these rolled forward? Why on the 13th? And why no adjustment at the SPO?
So many questions.