No thoughts at all until after the July 1st deadline. Just another blind-sided schmuck, am I.
Thanks for you thoughts Dell.
What's strange to me is that this news item is no-where on any of the popular news forums, like yahoo or marketwatch.
Something like this would normally be blasted all over marketwatch- they love this stuff!
So it appears from this post that the situation is, indeed, worse this year than last year? Didn't the bond holders (last year) appoint an overseer of sorts, to monitor the situation?
I'm confused. And why hadn't we heard anything earlier- as in "things are getting worse in PR as each month goes by" kind of thing. I guess all we've got right now is hope.
A bunch of us that have held MBIA shares for a few years are indeed disappointed at this point. Others, who have held for even longer periods of time, seem to have grown a kind of immunity to all this PREPA #$%$ None of this, and I mean NONE OF IT existed until October of 2013.
All of the PREPA #$%$ was solved about 12 months ago. Then just before this July bond payment, it all comes back. Suddenly, Puerto Rico is on the verge of BK. But not on the verge say 2 months ago. For 12 months, the Puerto Rico electric authority, who uses oil to generate electricity, has had oil between 2/3 and 1/2 the price it had in 2013 and 2014. But it is still on the brink of BK. #$%$
Que? Last December, the stock went up 36%, as it "blasted through $10." This time, it went up 81%.
Well, the idea here is that he never losses money, not that he makes money. But in this case, he would have to make $1,300,000 in order to break even. After much discussion on the MBIA board, no clear answer was forthcoming, unfortunately!
Myself? I think the MM has until June expiration to buy 1.6 million shares. Others have said that, in this case, the MM first bought the 1.6 million shares, then did the deal with the trader. (The trader proposed the deal days ago, and the MM needed the time to get the shares). So he already has purchased the shares by the time the position became known, which was yesterday, May 19th.
Well, the "spread" in this case is 0.31, if we assume the shares were @ 2.50 when the position was set. But hey, thanks for pointing out the position- we have until June 19th to come up with some sort of answer!
Much discussion over this excellent point: what does the Market Maker do? Many have said that the MM NEVER losses- he takes "an offsetting position". In this case, he needs to buy 1.6 million shares, since he had to buy the puts from the trader. So he's both short and long at the same time. Hummmm.....any thoughts???
Hi js: I'm used to seeing large positions opened on the MBIA (ticker: mbi) option chain. From experience, a large, even number like the one you've pointed out tends to indicate a sell-to-open position.
So, a large trader with $4.8 million of collateral ( 3 x 1.6 million) or, a trader with 1.6 million shares (or more) is betting that the shares will rise over $3 by June 19th. If he's right, then he collects all of the 0.81 per contract, or 16000 x 100 x 0.81= $1,296,000 before commissions. Nice work if you can get it!
I'd say that the other side of the trade is the Market Maker, rather than another trader.
Finally someone mentions what I have been wondering about since ESI popped 36% last December. Thank you, Steve!
Why would Cerebus lend this company, or any other company $100 million unless they had had a long, hard look at their financials? Isn't this the killer question?
That sounds correct: the trader stays Bearish at minimal cost, but @ .02 per contract (0.53- 0.51) it's still $74,000. Yikes!
I see the trade and yes, it looks neutral @ something like 0.51 on each side, although I did see 0.53 on the August 8 side earlier in the day.
But if it is neutral in cost, it seems to me that the trade is Bearish; the trader makes no money if MBIA shares increase in value. Both sides of the trade will decrease, and the money made on the "sell" side (August $8 strike) to buy the "buy" side (Jan $7 strike) disappears as the "buy" side slides to zero.
The trader is betting that the shares stay above $8 through August 21st, then start to decline past $6.50 by next January.
What a weird trade!
Sentiment: Strong Buy