4000 April calls and puts at a strike of $12 = 400,000 shares
2000 June calls and puts at a strike of $12 = 200,000 shares
2000 July calls and puts at a strike of $12 = 200,000 shares
And of course, 18000 May calls and puts at a strike of $12 = 1,800,000 shares
Shares created out of thin air available to short. Why?
To hold the price down as ARNA awaits good news from DEA and EU. These shares will be shorted naked, dumped onto the market, crashing the price.
No other purpose for a reverse conversion especially when shares are extremely scarce.
Sad the retail investor has no chance in this game at all. Very sad. Playing field is anything but level.
1500 RCs on Fri. 5/3 at 11:14. Yahoo seems to have same amount traded today, but I cannot find it elsewhere.
Anyone know the time it occurred today? If it did?
Sentiment: Strong Buy
This is more than just a coincidence. I believe we are on the verge of DEA or EU announcement and shorts are preparing to crush the pump. Over 3 million shares let loose at market will do the trick.
Definition of 'Reverse Conversion'
A finance and risk management technique based on a put-call parity strategy that consists of selling a put and buying call (a synthetic long position), while shorting the underlying stock. As long as the put and call have the same underlying, strike price and expiration date, a synthetic long position will have the same risk/return profile as ownership of an equivalent amount of the underlying stock.
In a typical reverse-conversion transaction, a brokerage firm short sells stock and hedges this position by buying its call and selling its put. Whether the brokerage firm makes money depends on the borrowing cost of the shorted stock and the put and call premiums, all of which may render a return better than the money market with very low risk. In the context of futures markets, a trader would be synthetically long and short the underlying futures while looking for arbitrage opportunities.
It becomes illegal when those shares shorted are not returned or never owned in the first place. Naked shorts. Market makers are exempt. Naked short at will.
Others have tried this and got busted big time. If I remember correctly they were not market makers.
How do you think buying and selling options makes shares available to short? Is this a simultaneous short cover with an option trade? I am surprised ARNA is not down on the VVUS news. DEA is killing ARNA shareholders!
That's not how it works. By selling naked puts in the money, you automatically and immediately get those shares to trade. These shares are usually sold naked on the market at any time. Calls are purchased as protection. Reverse conversion is practically risk free minus the cost but of course market makers do not pay anything to create this trade.
Looks like they are evaporating April calls. S!@!@H!#$!@.
I just saw this message on the IV board:
The SEC returned my email and call
Usually the SEC sends a standard email back saying thank you, we received your complaint etc.
They do look at each case because it's usually signed by a lawyer or worst case a public education person.
But today I had a different kind of email.
It was from the NYC office. I had alerted a chief there and his assistant who had prosecuted an illegal reverse conversion before and sent them additional info on top of the official forms I filled out to make sure these reverse conversions are done properly and are not abused.
A gentleman from that office emailed AND called me today. In the email he wrote:"We are taking your complaint very seriously, and have referred it to the appropriate people within the SEC.". Good stuff ! It wasn't so much a complaint but a heads up but at least I feel good knowing the cops are looking into a potential abuse scene.
Can't happen fast enough
That letter several weeks old. New reverse conversions happened today for 4000 April, 2000 June, and 2000 July for 800,000 shares. Of course May reverse conversion still stands at 18000 call and 18000 put contracts for a total of 1,800,000 shares! 2.6 million shares potentially naked about to flood the market.
Need to update SEC NYC office about recent developments.
yes I am afraid so. dea delay is intentional no doubt with vvus paid staff commenting on arna public comments section.
dea paid off by vvus perhaps and hedge funds, much like fda was in approving q and now modifying rems before b even on the shelves.
reverse conversions to the tune of about 3 million shares in just the last few weeks.
all those people saying this isn't a rigged game, please come forward now and explain these events away.