CYD - Enormous Multi Leg Bearish Spread

[livevol_ophir]

The company averages 406 option contracts a day - with an hour to go in trading it has traded over 21,000 (that's not a typo).

Essentially every contract went up in a three legged option trade.

The trade was this:

Sell 7005 Feb 17.5 calls @ 0.30
Buy 7005 Feb 15 puts for 1.40
Sell 7005 Feb 12.5 Puts @ 0.20

Total outlay = 7005*100*(1.40 - 0.30 - 0.20) = $630,450.
Max Gain = 7005*100*(40) + 0.30 + 0.20)= $1,120,800 when stock is 12.50 or lower.
Max Loss. = Unlimited

The bet is that the stock goes down to 12.5. A good way to analyze an "unorthodox" multi-leg option startegy is to break it up into two trades. Here's an easy way to look at this trade:

(1) Buy the Feb 15/12.5 Put Spread
(2) Sell Feb 15 Calls to pay for it

The stock chart illustrates that the stock is at/near a high and may be what chartists call "toppy."

You can see details, trades, prices, charts and payoff on my blog:
http://livevol.blogspot.com/2009/12/china-yukai-cyd-multi-leg-bearish.html

 

[OTCkrak]

would be fun for someone to control the float and bring this up to 22.00

 

[Rodney King]

Quote from livevol_ophir:

The company averages 406 option contracts a day - with an hour to go in trading it has traded over 21,000 (that's not a typo).

Thanks for the info -- you blog looks good too.

However, although 21,000 sounds like a lot of options, basically it amounts to a $½million'ish gamble on a company with $½billion'ish market cap -- not a big deal in the grand scheme of things.

 

[JJacksET4]

Quote from OTCkrak:

would be fun for someone to control the float and bring this up to 22.00

Yeah.

It does make me wonder though if someone knows something or is planning something. I mean, could this person have some shares and sell them in small amounts but like at a panic level (i.e. market sells) to try trash the price, while then making $$$ on the options trade.

Or, does someone have insider info they are about to head down in value?

I have no idea. Will be interesting to watch though.

 

[Rodney King]

Quote from JJacksET4:

I have no idea.

A disarmingly honest remark.

 

[stock piker]

Quote from livevol_ophir:

The company averages 406 option contracts a day - with an hour to go in trading it has traded over 21,000 (that's not a typo).

Essentially every contract went up in a three legged option trade.

The trade was this:

Sell 7005 Feb 17.5 calls @ 0.30
Buy 7005 Feb 15 puts for 1.40
Sell 7005 Feb 12.5 Puts @ 0.20

Total outlay = 7005*100*(1.40 - 0.30 - 0.20) = $630,450.
Max Gain = 7005*100*(40) + 0.30 + 0.20)= $1,120,800 when stock is 12.50 or lower.
Max Loss. = Unlimited

The bet is that the stock goes down to 12.5. A good way to analyze an "unorthodox" multi-leg option startegy is to break it up into two trades. Here's an easy way to look at this trade:

(1) Buy the Feb 15/12.5 Put Spread
(2) Sell Feb 15 Calls to pay for it

The stock chart illustrates that the stock is at/near a high and may be what chartists call "toppy."

You can see details, trades, prices, charts and payoff on my blog:
http://livevol.blogspot.com/2009/12/china-yukai-cyd-multi-leg-bearish.html

You mean "sell the Feb 17.5 calls to pay for it"

 

[stock piker]

Quote from JJacksET4:

Yeah.

It does make me wonder though if someone knows something or is planning something. I mean, could this person have some shares and sell them in small amounts but like at a panic level (i.e. market sells) to try trash the price, while then making $$$ on the options trade.

See Ping Jiang, formerly of SAC. Basically, the entire equity derivatives team.

 

[IV_Trader]

Hmmm , what a weird trade. I don’t think they long 700K shares (they would off be better just selling 15 strike calls for 1.10) , so I agree with OP on bearish bias

Yes, great blog

 

[TraderSU]

They are not doing good so FAR.