Jump to content

Big Money Making Opportunity


Gregmal

Recommended Posts

Shorting these sorts of manias is one of the fastest ways to blow up an account. If you do want to short calls, please use spreads, otherwise this sort of move can lead to ruin.

 

 

Sound advice here!  Ian I remember you from several years ago when you authored an article on Yongye International - I think you were pretty young at the time.  I had investigated that company, including on the ground in China.  It was shady.  Went private at $7.10.

 

I think they bought a zero, but we'll probably never know. As for my age, I'm 29 now, so I was quite young back in 2011.

Link to comment
Share on other sites

Yea I think it's really tough to work something with the puts in terms of a purchase. They're just way too expensive. IMO the money is in selling the options, whether it be puts, or calls, or both, especially if you can trade around in the stock and also collect some of the rebate. I believe there are now 2020 options available. Was told the borrow today was near 80% a month. Just incredible. Makes the Volkswagen squeeze look like child's play. This has a $25B valuation on 23M in sales.

 

Link to comment
Share on other sites

Buy the stock to lend, sell the call.

 

Let's use the Mar'19 30-strike Call as it has more volume. You're exposed below:

 

Stock Price - Call Premium - Interest received

 

120 - 89 - 6 months of borrow

 

In the worst case, you'll need to make $30 in borrow between now and March 19 to break even if the stock goes to zero. Anything else is gravy.

 

I suspect the call buyer would exercise the call immediately, so you wouldn't get the chance to lend your stock.

 

This is indeed what happened. Looks like my shares were called.

Link to comment
Share on other sites

Buy the stock to lend, sell the call.

 

Let's use the Mar'19 30-strike Call as it has more volume. You're exposed below:

 

Stock Price - Call Premium - Interest received

 

120 - 89 - 6 months of borrow

 

In the worst case, you'll need to make $30 in borrow between now and March 19 to break even if the stock goes to zero. Anything else is gravy.

 

I suspect the call buyer would exercise the call immediately, so you wouldn't get the chance to lend your stock.

 

This is indeed what happened. Looks like my shares were called.

 

For general education purpose can someone explain to me: why would someone buy a call at premium and then immediately exercise it? Why didn't they buy stock which would have yielded the same result without paying call premium?

Link to comment
Share on other sites

Buy the stock to lend, sell the call.

 

Let's use the Mar'19 30-strike Call as it has more volume. You're exposed below:

 

Stock Price - Call Premium - Interest received

 

120 - 89 - 6 months of borrow

 

In the worst case, you'll need to make $30 in borrow between now and March 19 to break even if the stock goes to zero. Anything else is gravy.

 

I suspect the call buyer would exercise the call immediately, so you wouldn't get the chance to lend your stock.

 

This is indeed what happened. Looks like my shares were called.

 

For general education purpose can someone explain to me: why would someone buy a call at premium and then immediately exercise it? Why didn't they buy stock which would have yielded the same result without paying call premium?

This is kind of what I didn't understand. What's the point?

Link to comment
Share on other sites

why would someone buy a call at premium and then immediately exercise it? Why didn't they buy stock which would have yielded the same result without paying call premium?

 

The call that he was talking about is so deep in the money that it wasn't selling at a premium.

 

Ah. Thanks.

Link to comment
Share on other sites

  • 2 weeks later...

Anyone looked at IGC, it is a US based pot pharma, selling CBD infused soft drinks, up 300% in last one week, it sure is a bubble. How one can take advantage of this mania using options ?

 

Looks like a small float with no options(at a very brief glance). That said, the ATM offering is likely to put somewhat of a lid on this. Doing a 15M offering with a 30M+ valuation is huge. Additionally, ATM means these will be dumped directly into the market, rather than placed.

Link to comment
Share on other sites

why would someone buy a call at premium and then immediately exercise it? Why didn't they buy stock which would have yielded the same result without paying call premium?

 

The call that he was talking about is so deep in the money that it wasn't selling at a premium.

 

Ah. Thanks.

 

I'm still lost on this one. Even if there is no premium and the call's price is exactly equal to the price of the stock minus the call's strike price why bother exercising the call. Commission fees alone would make this a worse strategy than just buying stock, correct? Even still, it seems most extremely deep ITM calls will usually have a slight premium to them.

Link to comment
Share on other sites

why would someone buy a call at premium and then immediately exercise it? Why didn't they buy stock which would have yielded the same result without paying call premium?

 

The call that he was talking about is so deep in the money that it wasn't selling at a premium.

 

Ah. Thanks.

 

I'm still lost on this one. Even if there is no premium and the call's price is exactly equal to the price of the stock minus the call's strike price why bother exercising the call. Commission fees alone would make this a worse strategy than just buying stock, correct? Even still, it seems most extremely deep ITM calls will usually have a slight premium to them.

 

I think the thought process here is: yes, the deep ITM call has slight premium, yes, you will have to outlay more cash for stock, yes, you will lose on commissions. BUT. You can now lend the stock at 30% interest, so you are better off converting to stock than holding ITM call.

 

You may ask then: why did that person buy the call in the first place instead of buying stock? Well, it likely was not deep ITM when they bought it, so the above equation was not as attractive.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...