What if OI is greater than floated shares?

S

SpanishMainCapital

Is it ever possible that the open interest is greater than the total number of shares floated? After all there's no limit to one opening to sell or opening to buy as long as there is a buyer or seller, so what if the total number of option contracts exceeds the available shares of a company floated? What happens.
Here's an e.g.
Floated shares 4 milllion and current price 10$.
Lets assume there are 30000 contracts at the 10 strike, 30000 contracts at the 8 strike, 30000 contracts at the 6 strike and 30000 at the 4 strike, all Put side.
Thats 12million shares, so if the price plummets to say 3$ all contracts are in the money so how will the market satisfy them?
 
I don't think exchanges are interested in options on such a small company...
There needs to be a certain degree of market stability and options on a company that small ensure that will be an issue.

Also, I'm pretty sure there is a position limit to the amount of net long options you can have as a single participant, defined by the exchange...
 
Also, technically I think in this case, the buyer of the puts is kinda screwed in a way.

He will exercise his puts without the possibility of having bought enough stocks to deliver... so he either does not exercise and lose out...

Or, which is more fun ;), he will exercise and realize he's massively short... can't borrow the stocks and get's a buy-back call from his bank... entering a huge short squeeze and lose his shirt because the stock hits 30, 40... 50 whatever is there... (google volkswagen short squeeze)

So if this would be technically possible... you would buy calls, OTM... or ITM... wherever you could buy the most. Exercise all... even OTM, and short squeeze the shit out of everyone!!!

[edit] that has a nice ring to it... come friday night in the pub, having a beer... shouting rounds to everyone, because you short squeezed the shit out of everyone!! :p
 
Last edited:
SpanishMainCapital said:
Is it ever possible that the open interest is greater than the total number of shares floated? After all there's no limit to one opening to sell or opening to buy as long as there is a buyer or seller, so what if the total number of option contracts exceeds the available shares of a company floated? What happens.
Here's an e.g.
Floated shares 4 milllion and current price 10$.
Lets assume there are 30000 contracts at the 10 strike, 30000 contracts at the 8 strike, 30000 contracts at the 6 strike and 30000 at the 4 strike, all Put side.
Thats 12million shares, so if the price plummets to say 3$ all contracts are in the money so how will the market satisfy them?
More...
There are also reporting requirements when you acquire ownership or control a certain amount of the stock of a company, I want to say 5 percent, and options are included. So everyone would know what you were up to. In many companies that also triggers some kind of poison pill in the form of a rights offering that the hostile acquirer can't participate in, essentially they just keep issuing more shares that dilute you but no other shareholders.
Interesting question though, I guess it's possible to make it happen if you were rich and just wanted to break sh!@t to see what would happen even though it actually was neither in your best interest or anyone elses. Seems there's some of that behavior around from time to time.
 
Last edited:
True, you have to report it to the SEC when you accumulate 5%, but you used to able to get around that via options. Icahn did that when he accumulated his stake in Yahoo and Loeb, later on, but had to report it to the FCC(?)...interesting article. I do remember, the VW, short squeeze as Porsche, rumored to be in interested and with Saxony owning 20% there wasn't enough shares available so went from $100 to $800, making it the most valuable company in the world. If I remember right, Porsche was sitting on $5B-$10B in paper profit from those options only for it to get a margin call and VW bought them. They have been "married" for decades as the chairman of one sits on the board of the other and vice versa. Interesting question, but I assume protections are in place to not have multiples of naked options relative to shares.
 
I remember reading once a trader who amassed a position in the NZD greater than new zealand's money supply but that's otc. not sure about exchange traded securities
 
Superstar2317 said:
True, you have to report it to the SEC when you accumulate 5%, but you used to able to get around that via options. Icahn did that when he accumulated his stake in Yahoo and Loeb, later on, but had to report it to the FCC(?)...interesting article. I do remember, the VW, short squeeze as Porsche, rumored to be in interested and with Saxony owning 20% there wasn't enough shares available so went from $100 to $800, making it the most valuable company in the world. If I remember right, Porsche was sitting on $5B-$10B in paper profit from those options only for it to get a margin call and VW bought them. They have been "married" for decades as the chairman of one sits on the board of the other and vice versa. Interesting question, but I assume protections are in place to not have multiples of naked options relative to shares.
More...

If I recall Porsche was acquiring control though swaps. It was not a well kept secret but no one could or was willing to confirm it.
 
I watched them pile in a stock over 100% of the stock's float short, Naked Short Selling use to happen lots during the 2000-2010 period. One of the people who is nothing more than a person you meet in life and realize their not a friend or acquaintance, just someone passing by you wasted you time on. He decided to concentrate his account because he know's better than all the high paid Hedge Fund analysts. Bill take's out 20,000 shares as it falls from $20 to $15. I hated the chart, told my friend to buy some puts to protect his position, went on deaf ears.

Next I told my friend to watch the Option time-and-sales because I was going to buy $12,000 worth of Puts, with a stock trading with over 100 percent short something bad was happening. The Puts IV rocketed because I paid $2.50 and the Puts jumped to $3.50 with only a $1.3 price drop. The Put Buyers came back paying up to $4 for puts I paid $2.50 so the biotech-guru said, "why do you think the Puts are getting priced so crazy"? I guessed news leaked the stock trails had failed and begged my friend to get half of his position out, he adds more to a losing position.


Two days later the stock opened at $2, the trials were a total failure and my biotech friend blew-up all his money. The clues were the Shorts exceeding the float and Naked Shorts were pilling in even at $12 they could not get enough of this stock. The clues were there like your question about "Open Interest" higher than the float. I've never heard of a Open Interest exceeding the float of the stock, I've seen Short Interest 2 or 3x the float of garbage penny stocks.
 
JesseJamesFinn1 said:
I watched them pile in a stock over 100% of the stock's float short, Naked Short Selling use to happen lots during the 2000-2010 period. One of the people who is nothing more than a person you meet in life and realize their not a friend or acquaintance, just someone passing by you wasted you time on. He decided to concentrate his account because he know's better than all the high paid Hedge Fund analysts. Bill take's out 20,000 shares as it falls from $20 to $15. I hated the chart, told my friend to buy some puts to protect his position, went on deaf ears.

Next I told my friend to watch the Option time-and-sales because I was going to buy $12,000 worth of Puts, with a stock trading with over 100 percent short something bad was happening. The Puts IV rocketed because I paid $2.50 and the Puts jumped to $3.50 with only a $1.3 price drop. The Put Buyers came back paying up to $4 for puts I paid $2.50 so the biotech-guru said, "why do you think the Puts are getting priced so crazy"? I guessed news leaked the stock trails had failed and begged my friend to get half of his position out, he adds more to a losing position.


Two days later the stock opened at $2, the trials were a total failure and my biotech friend blew-up all his money. The clues were the Shorts exceeding the float and Naked Shorts were pilling in even at $12 they could not get enough of this stock. The clues were there like your question about "Open Interest" higher than the float. I've never heard of a Open Interest exceeding the float of the stock, I've seen Short Interest 2 or 3x the float of garbage penny stocks.
More...
How do you short penny stocks?
 
You must log in or register to reply here.
Back
Top