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Vocus, AŞ Message Board

  • trdr1904 trdr1904 May 10, 2013 4:37 PM Flag

    Open interest in may 12.5 puts

    For those of you scratching your heads over the cryptic comments on this board (admittedly they are clever and entertaining), I will attempt to translate for you in simple english. There is a huge open interest in the 12.5 Puts. They were sold by Okumus Opportunistic Value Fund as a way to collect some "cheap" premium (the "putz writer").It turned out not to be so cheap after all when the stock plunged 40%, but hey what's $12 Million to a market wizard(google Ahmet Okumus). So now the mechanics of this trade is that the counter party that bought the puts from Okumus has to unwind it by buying back roughly 1,350,000 shares by May expiration, which is next Friday ("five sessions left"), unless they want to be short the stock. Option market makers tend not to take inventory of shares in that size. From Okumus' form 4 filings with the SEC ("got filings") you can see that they have only been allocated on a small amount of the puts ("a pittance of puts"), and open interest remains at 13,439 as of today's close since no volume traded in them today. As mentioned above, the speculation is that the market maker will have to buy 1,350,000 shares between now and next Friday to close the trade. Given that only a few hundred thousand shares are trading each day, this kind of volume on the buy side would significantly move the stock higher, especially since 16% of the float is now tucked away at Okumus (at least until he gets back in the black which is well north of here), and there has been sufficient volume since the blowup for any long term holders to have exited. My only issue with this scenario is that it is possible that the market maker has already bought stock against his puts and essentially closed out the trade. I will admit that I don't know for sure if it is customary for market makers to do that though as I said before, I don't think they like to deploy their balance sheets to hold huge amounts of stock (~$10M) for long periods. Maybe GTH has better insight into that.

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    • 1904 thankyou for the English. now I think I understand that GTH wasn't beening rude but just over my head. this is very interesting. thanks again.

    • Thanks for the info. Bought in at 8.35, waiting for this thing to pop!!

      Sentiment: Strong Buy

    • so someone actually understands, bravo! Did you like my poetry? Anyway, this 12+m share event was no accident. And the stack of puts were bought by somebody, (same entity imo)who you would think should be exercising big time. I assumed ahmet was behind it all buying and selling and caused the event after he positioned his funds. He maybe schemed an angle and forced it, but the facts are those ITM puts are just sitting there, what do you think?

      • 2 Replies to guide_the_herd
      • YUP YUP YUP

        what a slick smelly little brown Devil!!

        daddy's money has it's perks

      • I did enjoy the poetry. This is an odd situation to say the least though I don't think that Ahmet was on both sides. I think someone just picked him off. Based on my understanding of his strategy, he looks for beat up names and then tries to bottom fish, usually entering by first selling puts. Then he either collects the premium (in this case it would have been ~3-4% in less than a month which is pretty good annualized return). He is also not afraid of being very concentrated so this also fits his profile. He probably also figured, hey the CEO just bought $1MM worth of stock 2 months into the quarter at ~$14 so what is my risk here. So here is my theory: when Ahmet came in to an option market maker looking to put this trade on (I assume he used whoever he is prime brokered with) maybe they didn't want to take the entire trade and asked around to see if they could lay off the risk. They would have looked at the holders list and asked the big holders if they were looking for protection ahead of earnings. They would have called Cortina for sure. Then Cortina, who we now know based on their 13G was already gone (they sold an 8% stake all in one quarter so maybe they had some insight into what was coming down the pipe), might have said that they would happily take down the entire trade. Then the stock blows up, Cortina crushes it and has the balance sheet to have simply bought stock against the puts on that high volume first day down in which case we don't get the rally next week. Ahmet is bagged but decides to get his average better by buying stock outright, which he filed that he did. He gets his average sub $10 (we can calculate it exactly if we want) and he figures well it will eventually bounce back. Maybe if it gets closer to his average he starts selling calls against his position. If he gets very desperate he can switch to a 13D and push the company to sell itself. This is all just wild speculation though. That said, I am long some stock to see what happens.