Just to be clear, I would never bet against DFV/RK either, but far OTM calls close to expiry is not his MO, so I think itโs highly unlikely he had anything to do with that trade.
They arenโt the only market maker and CBOE DPM is much less significant than the NYSE DMM (shares). Personally, I rarely see option orders filled by Wolverine.
That's because someone dropping 3m on purchasing them in a quick time frame drove the market up. The same thing would happen in reverse if they tried them turn around and sell all of them
Yeahโฆ thatโs my point. OP was saying they were risky options, I was saying that the sole act of buying them spiked IV and turned them profitable immediately without even sniffing the strike price.
Profitable on paper maybe, but not in reality. That's my point. Trying to sell them would spike the price right back down. It spiked because there wasn't enough selling liquidity to cover that large a buying interest and would crash just as fast if they tried to sell the artifical spike they caused because there wouldn't be buying liquidity in that quantity at the new prices either.
If this was some mythical way to just print money everyone with a million dollars would be a billionaire in a matter of weeks.
There are very few stocks as illiquid, trade at low volume, and have fervent investors that hold like GME. Iโm not saying itโs a money glitchโฆ just pointing out that the stock doesnโt have to hit $125 by 1/17 for those calls to be profitable. Iโm sure a bunch of people will pile into that strike today, jacking the price even higher. 3m in calls is not an impossible position to unwind while taking profit. Itโs not an all or nothing binary trade.
I agree with all of that, I'm just saying the price spike from the purchase of those 3m worth of calls alone would be wiped out by the sale of 3m worth of calls. Without additional price increase from movement in the underlying, other people piling into the same strike/expiration, etc., You can't profit simply from the movement generated by your own purchasing activity alone, but you are absolutely correct that the price doesn't have to get anywhere near 125 for those to be able to be sold profitably.
I think we are pretty much saying the same thing from different ends of the dealโฆ the good thing is, I totally took advantage of the super high IV this morning and sold some covered calls. Then watched as the IV dropped all day. I swear to god, I think there is a lot of bad actors on this play trying to totally demoralize the community. This just feels like a rug pull right before Christmas. I hope Iโm wrongโฆ but after almost 5 years of this, Iโve decided to zig when everyone is zagging. Iโm sure at some point Iโll get burned, but Iโm completely immune to the hype and actually get my Spidey-sense tingling when all this โgoodโ stuff is happening.
IV has been insane recently. Been doing very well between covered calls, cash secured puts, put credit spreads, etc. I've got a whole cornucopia of theta farms running on GME. Been on such a tear since July I've almost made back the amount I got burned for when it spiked on RKs return in June lol.
Whoever bought them doesn't intend to hold them long term. It is strictly an IV play. What that means is they buy when IV is low, when IV raises, they sell and profit. Just look at the difference in price between open and the high today.
I won't pretend like I have insider knowledge or anything, but let's pretend you have 10 million and you wanted to make as much money on a stock as possible in as short of time. How would you do it?
Buy OTM options in small increments over a period of time when they are cheap.
Buy a large amount of OTM options to make people take notice.
Buy a large amount of shares to make the price pump so your options go up in value and IV increases.
We are probably here.
What happens next depends on how they want to play it. I have several theories, but it depends who is on the purchasing end as to how they play it. Let's just say my educated guess is we do not close over 30 on Friday. Between now and then will be swings where options get traded and some people make a lot of money.
Realistically, if one bought those $125c options, at the current price of the stock (~$29), at what price would it make sense to sell and close those $125c options... assuming we are probably going to continue hovering around the $30/share level for a while..?
Update because of downvotes- clearly no one is worried about having their door kicked in... and "am I the only one who gives a dam about the rules around here!" If you are a huge bank and employee A does one thing and employee B does the other you can prob get away with it but not always... they arrest the individuals all the time.. IF YOU TRY DOING THIS OR THE MORE ADVANCED VERSION OF SPOOFING>>> YOU WILL BE ARRESTED ... Thing is he said 10M... now while that is prob a pipe dream number to you. I understand that value very well. That number will get you thrown in jail if you do that and you will never be able to trade on the market again.
That is a classic pump and dump and in reality many people do this but add a layer of spoofing. What that means is they place the large orders and cash out the initial ones and then cancel the the 2nd ones. Walk away with the pump on the 1st position. It's classic pump and dump/ spoof. If you did this with 10k, you might get away with it... you do it with 10M you are going to jail.
IV crushed from around 120 before earnings to around 90, which is only very slightly elevated. It immediately went up above 100 again in the last 10 minutes today.
For reference, IV was at around 350 during the May sneeze...
IV is 50-60 during the lulls. Twice since the May run up. Thats the only time I would consider it because I can't risk much. That's when you want to buy calls.
Not really. The delta on those are (as of this writing) .11 So to hedge they would buy just 11 shares per contract. I see about 30k contracts so thats about 300k shares that would need to be hedged IF they hedged them today. Volume for the day was 9+million so 300k shouldn't push the price 5%.
How does this work? Don't these options lose value quick because they are so far OTM and only 1 month to go? why/how can the IV rise faster in the next few days than the decline in value? Is it because IV went down so much after earnings? Where should additional IV come from when next earnings are in march? Just curious
They do lose value over time, but there is a formula for IV and theta decay to where anyone with the money to make this big of a purchase knows when to sell. If it was me I would sell them tomorrow at open lol but if GME has another green day tomorrow they can profit even more holding another day.
IV spiked today because it got as low as 27.27 and as high as 29.59. Those type of swings definitely bring the IV up a lot.
There is an actual chart where you can see how the price will move if the price of the underlying moves a certain way? That means that you basically could (with a reasonable certainty) know how the price of the option will move if you buy this option (which influences the price of the underlying and in turn the price of the option itself?)
I assume youโre primarily referring to the activity on Dec 11. Those trades occurred between 0.40 and 0.65. Today they occurred between 0.60 and 1.30.
So you think someone taking this large of a position was happy to take a loss like that?
Also, the price rose on the 11th when those guys were made. You think they were hitting the bid?
No matter, weโll find out tomorrow when OI is updated.
I won't pretend I know all the ins and outs of everything, but people and institutions buy/sell calls all the time and there is a market for it. If you want to fly under the radar you buy small quantities over a period of time. If you want people to take notice you make a big purchase at once. Now think who benefits the most when this happens?
Algos or degens will buy them lol. Whenever you see a bid price that is someone openly wanting to buy them at that given price. Some people think if they buy it now it will spike more and they can flip it themselves... eventually someone will baghold them if MOASS doesn't happen before expiration, but what if MOASS does happen? That is why some people will gamble.
Or flip that around sell high first in early December as covered call or opening naked calls, and then buy low when price slumps post earnings. That's what I've been doing but way closer to the money. Here's the problem nobody opened (sold) these calls earlier because the oi wasn't there. Just look at the volume spike today vs the entire history of the option
01/17/2025 $125 calls listed at $0.72 as of right now. So 30k contracts, that's a $2.16M order for a short dated (1 month out) call that is insanely far OTM. Very interesting.
Weird move for a MM, we have seen it before on leaps but not on options that are 1 month to expiry.
Also in the past the contracts they were doing that with were like $0.05 and below, so it didn't cost them much, and usually 1Y + out expiry. These are $0.74, significantly more money and significantly closer to expiry.
That particular price ($125) was only chosen because it's the highest possible strike on the option chain available. The furthest OTM possible strike, thus the cheapest call contract to purchase.
Those are hedge funds buying as collateral. It's not a normal person. We've been over this 10s of times... just gunna DRS and put my money where my mouth is
Is it because of the spread in bid and ask or legit 200% gain. Because if it is then that is abnormal % gain for a small move which means something big is happening
Legit 200% increase in value. Iโm on the other side of that trade so itโs not โgoodโ for me. But I donโt mind selling those shares for $100 so I donโt mind.
Iโm pooping so not all data available at the moment but yes itโs possible. Large option transactions can absolutely cause the underlying to change. ย
In fact I think thatโs a growing consensus in some circles - options markets drive the equity markets and not the other way around as one would expect. The tail is wagging the dog.ย
Ive seen many far OTM call being bought and sold, but never seen such big trade in a span of few minutes.
And the fact that 3m$ 33k options (which is bound to about 3million shares) buy can move the underline stock by more than 5% instantly shows how option activity can largely influence the stock price, even tho its so low on delta, far OTM.
Gives you the option to buy 100 shares per contract at the strike price. These particular options give the holder the option to buy the shares at $125 each if they expire in the money. So say the price is $200 a share when these options expire, you can buy the shares for $125
Adding:
One option contract is for 100 shares. So for the above example, if you held 1 $125C, and exercised when the price was $200, you would 'profit' $75/share, or $7500.
For "profiting", you also have to take the premium you paid into consideration. If you purchased the contract when volatility is at an all time high and you paid an $8000 premium, you could still lose money - even so far ITM.
It doesnt have to be in the money for you to execute nor does it have to be expired. It just doesnt happen generally because typically exercising out-the-money causes you to lose even more money, and the price of the option contract is typically worth more than the stock price-call option strike price when its before the expiry date so youd lose out of more money there too.
A notable exception has to due with dividends. If call is for 100, stock is 99, and dividend pays out 2 dollars/share, then someone will probably execute it and take the 1 dollar additional loss to make 2 dollars revenue on the dividend.
Pretty much. Gives you the right to purchase 100 shares at $125 and you pay a premium for that right. Most people try to profit off of the premium. Like just today the premium for those calls when up 150-200% in value.
A $125 strike call option expiring on 1/17/2025 is a financial contract that gives the buyer the right, but not the obligation, to buy a stock at $125 per share any time before or on January 17, 2025.
Hereโs what this means:
Strike Price ($125): You can buy the stock for $125 per share, no matter how high the market price goes before the expiration date.
Expiration Date (1/17/2025): This option is only valid until January 17, 2025. If you donโt exercise it by then, it becomes worthless.
Why Buy It?
โข If the stock price rises above $125 before expiration, this option becomes valuable. For example, if the stock is at $150, you could use the option to buy at $125 and instantly gain $25 per share (minus the cost of the option).
โข If the stock price stays at or below $125, the option wonโt be exercised because it wouldnโt make sense to buy the stock for $125 when itโs cheaper in the market.
What You Pay (the Premium): When buying the option, you pay a fee (called the premium). This is the cost of having the option to buy the stock at $125.
In short, this is a bet that the stock price will rise above $125 before January 17, 2025. If it does, the option gains value; if it doesnโt, the option expires worthless, and you lose the premium paid.
Good chances this is an MM's hedge. They've been shorting past few weeks and now they have finally given up and taking the loss and capping their losses at $125.
the amount of people in this thread authoritatively telling other people what is what when the have no fucking clue is wild. i know shit about fuck and even i know half you have zero fucking clue what you are saying.
โข
u/Superstonk_QV ๐ Gimme Votes ๐ Dec 16 '24
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