Have my naked calls early assignment as early as 2 WEEKS before Feb OpEx.
So here's what might have actually happened...for those who haven't got a clue...
When a stock makes a violent move, a lot of the previously traded options will go deep ITM, and possibly lose all premiums. So you don't actually have to be naked to get squeezed...you can have a spread that goes deep ITM, then the short leg got assigned, even if you are covered by the long leg, trading options still doesn't affect stock prices, however, converting options to stock will. So the broken spread will probably kill your margin, which gives you a few hours to cover, even if your losses are limited due to the long leg.
So technically, it's not entirely short squeeze, because you don't know their entry point. Just because nflx gapped up huge, that doesn't mean shorts must be squeezed on margin, even if they are leveraged. But early assignment on those ITM calls will definitely bring in NEW UNINTENTIONAL shorts that are guaranteed to cover no matter what. It's easier for MM to control the ask this way and much easier to take out the ask without committing a lot of capital.
YOKU had a similar move 2 years ago when I got early assigned, from 50-70 in 2 weeks and then look at it now.
So in short, here's what may have happened if you haven't got a clue or delusional:
1. NFLX surge AH to 130s on ER day, no MM AH, only Electronic trading, low volume, easy to take out ask.
2. NFLX open 140s, squeezed a few shorts that came in under 100, attract daytraders and couple that with HFT, you got some huge white candles.
3. Early assignment of weeklys kicks in, explained why that Fri spiked up to 170
4. NEWS and UPGRADES kick in so nobody takes profits yet.
5. A significant amount of my naked calls got assigned on the night of Feb 1, NFLX went from 164 to 185 in three days after.
6. Got assigned again this week and went from 180 to 189
7. Now that Feb OpEx is over, Mar doesn't have as much ITM OI, so unless there is major news, this will pullback a little and possibly just follow markets' direction after, so don't expect it to drop significantly even if institution takes profits.
8. Don't bother looking at the technicals, it never tells you what will happen, but only what has happened. And the Gap to fill is actually 189 because there's a previous support/resistence before the Gap down 205 to 185 in 2011. See AMZN last May to Jun, pull out a chart and you'll see what I mean, Gap doesn't get fully filled if there's a sup/res level previously. So even if you are following technicals (which is junk anyway), don't expect too much upside here.
and finally, regarding that Icahn...........if you are long because of him, be careful!
He has about 5M shares and about equal amount of calls that are deep ITM in the 30s if I remember correctly. Now he can lock in his profits using mid or LT options. So essentially, he can sell his share without selling, LOL, and those don't get reported in filings either. Heck he might even have a net short position now, but all you'll see is that he's long huge in NFLX.
If you just have to be long, do some mid-term call backspreads...
The next two weeks will tell the story of how we go from here.
Still holding the naked calls assigned shares.
Interesting analysis, gammareversal. One possibility for those early exercise could be that the other party might have shorted the stock and bought the call to hedge. So when the stock goes up, to cover the short he might early exercise the long call.
Interesting read. I'd just add support to your last paragraph, by reminding folks that any number of positions can be maintained without disclosure. For some reason owning stock in a company is important, and can be cause to question motives, but you can short, or take up any number of derivatives without question. Just going with someone like Icahn for an example, he could have 1 share of NFLX, while shorting million shares, and holding 10,000 put contracts. He only needs to disclose his one bullish share in the company, and can ignore the 1,999,999 net bearish shares. Why even have disclosure if it's this perverse? I say all, or none, but one sided just leaves too much room for abuse when I think so many people don't understand the disclosed portions are only the tip of the trading iceberg.
Thanks for your thorough thoughts and analysis. I have been watching NFLX from its last earnings report, and all the game big moneys have been playing. Of all the comments here and other media sources, your points make much of sense to me. I lost some money betting on the other side, then stayed sideline watching the game being played thereby. Another funny game we are seeing on these days is with HLF - how arrogant those guys are acting. Thanks again for your thoughtful points. GL
Thank you for you response.
That's right, stock movements are more irrational than it used to be. Markets do change, whether it's manipulation or not. People get burned thinking the market would stay the same as it used to.
HLF is a mess, but I'm not familiar with that stock, so I'm not playing.
1: "Still holding the naked calls assigned shares" then you're short the stock...
2: YOKU : you can't compare it at all with nflx, back then this was a new listed one....
3: I agree with many things you said, and yes Icahn can try to trap retails saying he's long, but he's probably hedged at +100%(then he might even be short nflx)
4: you're saying tech analysis is worthless then you're giving the point 8 !! I would never invest without tech & fund.... but tech first....
5: This push of nflx was a set up organised by Icahn/Lampert/Reed and some others.. some of those billionaires put some money for everything to look good... then bribed some clown a la Cramer and give the impression of nflx to be the next biggest thing.... etc etc...
FINALLY: WHY DO YOU THINK CBOE BEGIN TO QUOTE SO MANY WEEKIES AFTER THE GAP UP !!!!!!!! without options we would see $125 within a week... those weekies are caviars for MMs..
1. Yes, I'm net short, but that doesn't mean I expect a downturn right away, but that certainly won't hurt me. LOL
2. I'm not comparing the two companies; I'm comparing the situation when there's siginificant early assignment, stock made similar moves.
3. Yes, and even if he chooses to sell, most filings came in late anyway.
4. Not really, my point 8 is that technicals are less than 50% accurate, which makes it worthless. I'm not making the point that it has to fill the gap, you can make predictions based on other factors, and prolly would come out just as accurate (50% or less). However, you could be very familiar with a stock, for instance NFLX, and "know" its way of movement. I'd say this, technicals are worthless on directions, but it's useful trading options, but ONLY IF you are familiar with the stock first. I see so many people just trying to apply whatever they see in online articles and apply it to certain situations, it's not gonna work that way.
5. I got a feeling same thing happened to LNKD, ER much closer to Feb OpEx, so you don't even need to go that deep ITM. squeezed 6 straight days to Friday, I don't have any positions yet.
Yeah, saw that too, actually FB had triple weeklys last Dec I think, and stock went from 25 to 30, those weeklys are sick to manipulate, but you just have to play along with it.