RMBS Expiration Discussion

vikky…

 

Nothing super-human about the stock price @ $16.00

 

This is the price where the largest number of option contracts will expire worthless. 

 

All of the institutional holders and big money trading companies have been pursuing an aggressive strategy of short-term option selling and hedging for net credits since March to bring down their collective cost basis’.

 

This strategy will continue until the HJW does whatever he is going to do and there are real numbers to inject to RMBS’s bottom line.

 

If you look at the Open Interest for AUG, $16 is clearly the best price for this strategy through expiration this Friday.  If they were to walk the price up to $17.50 that would bring 7,611 call contracts into the money (ITM) by $1.50, and only neutralize 3,528 Put contracts that are currently ITM.  So more than 4,000 additional contracts would then be ITM, needing to be closed (or covered).

 

In the reverse, walking the price down to $15 @ expiration would bring 4,401 Put contracts into the money by $1.00, and only neutralize 1,866 Call Contracts that would then be worthless.  So more than 2,500 additional option contracts would need to be closed or covered.

 

Therefore, the best expiration price for all of the institutional holders and traders who have large net credits via this strategy is @ $16.00 

 

So without any significant news event you can probably count on a ~$16 stock price on Friday.

 

bulltv

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On the last google earnings that reported on Thursday nite before options expiry, the 520 calls were about 50 cents. Guess no one figured that they would crush their earnings on the very last day before expiry. 

Stock was at 450.  But as luck would have it those contracts expired in the money when goog went up 70+ points to close at 526 if I remember - turning a 100 contract /5000$ investment into somewhere around $ 135,000( memory ?- could have been110,000) for an overnight gain of a cool  $130,000 ! 

Wonder how all those who thought their “safe” call writing and smartass put covering and all that fared when that little bomshell hit?  All I remember is that there were alot of 6 figure payouts at the window that particular Friday at the CBOE!  Let an Injunction, or a whisper of a settlement happen in the next 72 hours and let’s see how all those Rambus Bears feel!

LOL.

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Re: Stock price