One or two more days passed. Shares show up(as we saw) in failed to deliver data. By law MM is about to have to take actions or whatever(please collaborate) against party that sold him calls.
the problem now is that he's become so big that he would cause tesla to show up on the reg sho threshhold list. which it has not.
2 million shares is more than 2% of the float. even a quarter of these shares being fails-to-deliver would put him on the reg sho list, which only requires a 0.5% fail-to-deliver rate.
1) This way "big guy" had to sell new calls every week. Explains huge volume of option trading we see each week.
2) "Big guy" do not need to buy shares on open market. Explains low day trading volume.
i thought about this sort of thing too. except several problems - first, i have watched these trades go off and they usually go off after the stock is down a bit. it does look like the market maker is hedging out at least part of this beforehand. second, if it's two unrelated parties, i think the share volume has to show up as a trade. even if the trade is done in a dark pool i think it has to be reported on the consolidated tape somewhere, and therefore get counted into volume. we're not seeing big enough block trades on these days to account for this guy.
i suppose one possibility is that the trader is somehow affiliated with the market maker, so positions might be transferred internally without trade reporting? and then maybe they don't report the shares failed to deliver? but this makes no sense either, because the options get exercised against each other and offset the trade internally. so why even bother to put that on an exchange, just do it as an internal accounting entry.
A perfect rolling naked short without need to pay "TSLA Cost to Borrow", except to sell calls to MM at discount to intrinsic value of a stock... And sure "big guy" will need to have a buddy on MM side, but all MM's accounts are holding correct sums, all positions are hedged and all contracts are in place... Trades were done on March 5th, March 12th, March 19th, March 25th, and April 2nd. Four out of five of those days TSLA were up. So no huge positions were shorted on those days...
i understand your explanation. i was thinking that way as mentioned above, but can't quite make it work.
as far as no big shorts on those days, that's not necessarily true. shorts sell into a rally quite often, and generally when i watched those trades go off it was towards the lows of the day. for example the stock would go up, and then reverse as if someone was selling into it, and then the prints would show up.
i dunno man. hoping that one of the regulators will get back to me with an explanation.
they said they are looking into it, but historically the philly has been the dirtiest exchange out there. they were cited in the past for not having adequate policing.
http://www.sec.gov/news/press/2006/2006-84.htm
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Whoever is doing this must be quite hell-bent on it, and would have to follow the stock very closely. If so, the idea of that person not reading this forum is rather absurd. So: Would you keep doing the same thing if someone were on to you? Or would you change your MO (either to be able to keep your short position, or to obfuscate your trading pattern and create some sort of plausible story for what you have done)?
right, and some of the patterns have changed in the last week. some of the blocks are smaller. they are spreading across more strikes. the time of day has gotten later on some of the prints.
but no matter what they do, it's hard to hide this stuff. they have to go into deep in the money strikes where the time premium is near zero. otherwise they'll start putting up big prints well outside of where the options are trading and it will definitely arouse more suspicion. so as a daily check one just has to run through the first few expirations with strikes that are a few dollars or more in the money.
the jun 25 calls are the most glaring. once a week this trade gets done in good size with no increase in open interest. he can try to move to the jun 32/33s as he has, but that doesn't really hide him much.
all you have to do is look to the deep in the money strikes. look for prints that are near zero or negative intrinsic value (i.e. zero time premium), and then check open interest one day to the next. if the open interest doesn't change with big volume in the contract, then where are all those traded options contracts going?
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+1. Not implausible. Luvb2b also mentioned word of an ongoing/iminent investigation. Surely the person doing this, in collusion with the Market Maker, knows of this as well.
so let me clear the wording. i know the trades are being reviewed and investigated. but that doesn't mean there's a formal investigation ongoing. i hope you understand the subtle difference.
i don't know why it would take them more than a day or two to review this stuff. especially with the huge volume that went off yesterday. but the regulators move real slow. so who knows.
