Option Strategy 2

J

jdib

So, looks like a very similar situation to last year on FOMX .....look at this thread I started in March of '17

https://www.elitetrader.com/et/threads/option-strategy.307747/page-3#post-4425922

As a recap - someone was buying up the calls and keeping a pretty high bid on them - the stock came out with terrible news shortly after and the stock plumetted ( we think someone knew something).

Similar situation happening again - last two weeks someone buying up tons and tons of calls - mostly September 6 calls - at a premium of almost $3 sometimes more. FOMX is only trading at $5.75 and there's only 52 days till they expire.

Any thoughts? Could this be a short play again?
 
Why do you assume someone is buying tons of calls for a short play if long calls are delta positive. Perhaps they are selling calls and hedging off due to high IV....
 
Long calls vs short stock... And if for whatever reason FOMX doubles there's no problem. Pure gamma trade... works both ways, as long as it moves more than 50%....
 
JackRab said:
Long calls vs short stock... And if for whatever reason FOMX doubles there's no problem. Pure gamma trade... works both ways, as long as it moves more than 50%....
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So you could never lose money, right? :D
 
El OchoCinco said:
Why do you assume someone is buying tons of calls for a short play if long calls are delta positive. Perhaps they are selling calls and hedging off due to high IV....
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El Ocho - so normally the MMs keep the spread a completely absurd spread (like .80c to $3). Right now the spread being held up by a buyer.
 
If the MM are propping up that spread they are looking for maybe fools to buy at $3 so they can sell a bunch of highly inflated vol calls I would assume....
 
El OchoCinco said:
If the MM are propping up that spread they are looking for maybe fools to buy at $3 so they can sell a bunch of highly inflated vol calls I would assume....
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No, you'll see. They never even trade - now they're trading like crazy because a buyer is holding up the bid. There will be a big move (results due on their trial) just not sure which way - leaning towards the down side .
 
It looks as though someone may have bought 4K of the 6/11 call spread. Odd that the only OI is in the 6s and 11s. This thing either dot shots or goes to zero--hence the $6 call at 2.70. Why pay 2.70 when you can buy the shares at 5.75? BC is likely goes to zero.
 
destriero said:
It looks as though someone may have bought 4K of the 6/11 call spread. Odd that the only OI is in the 6s and 11s. This thing either dot shots or goes to zero--hence the $6 call at 2.70. Why pay 2.70 when you can buy the shares at 5.75? BC is likely goes to zero.
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Right - that's what I'm thinking.
 
Secret Santa said:
So you could never lose money, right? :D
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NEVER! It's easy... 50% baby...

EDIT... actually... depends on how it's hedged, how many deltas. I assume it's still hedged. Unless someone is putting about 1mln on a gamble.

What would the price have been in that 6-11 CS, about 2.00-2.25? What delta do you put on that... 40? Break-even down would be close to zero... and up it would be around 10... 11 the sweet spot.

Unhedged is great at 11... f#$cked lower to unch.
 
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