It seems to me like the only thing options are good for right now is giving bad actors the option to pull off some master fuckery in the markets, and maybe even wiggle their way out of the inevitable margin calls and liquidations that should be coming their way — all because of some overly greedy, piss-poor, and possibly even illegal, trading activities.
Two things I want to cover in this post …
1) Hiding Short Interest In deep OTM Puts and, more importantly …
2) Misvalued Puts (w/ an update from today)
But first, none of this is financial advice. I may have some of this wrong (and if you spot anything, please let me know). I try my best to stick to the facts, and wherever I might make speculation, I’ll point it out or phrase my speculation as a question. Like everyone else, I’m just trying to get to the bottom of shit here, and make sure this is a fair game for everyone involved.
1) Hiding Short Interest
As everyone probably knows by now, there’s a strong suspicion that open shorts are being stashed away in Put options using married Puts. Melvin had a 6MM share Put position that they didn’t disclose until April (they tried to get away with not disclosing this position at ll, but SEC eventually said no way). In their latest filing, Melvin shows no GME position at all. Poof, nothing. Problem solved, right? Fuck no!
If you don’t know about this, you can learn about it here: https://www.reddit.com/r/Superstonk/comments/nacqtm/may_update_on_the_marriedput_forensic_analysis/?utm_source=share&utm_medium=web2x&context=3
I also provide my own analysis and additional supporting evidence here: https://www.reddit.com/r/Superstonk/comments/ndaad2/dd_saturday_special_robinhood_citadel_options_and/?utm_source=share&utm_medium=web2x&context=3
2) Misvalued Puts (w/ an updated example from today)
Misvalued Puts … I almost find this more troubling than Married Puts hiding open shorts because almost no one knows about it, and the only way to detect it is to own one of the Puts affected (and trust me, they are terrible Puts … I only happen to own any because I’m an idiot. That said, hedge funds own a ton of very bad, very OTM Puts. But why do they own them? Maybe what I’m about to show you has something to do with it …
Now I’ve been posting on this phenomenon for weeks. I’ve contacted my broker (they basically shrugged their shoulders), as well as an unnamed third party. Still, this problem persists (and in my opinion, it’s a big, big fucking problem!).
You can get the gist of what’s going on here: https://www.reddit.com/r/Superstonk/comments/nbjckf/stress_tests_are_easy_with_cheat_codes_may_13/?utm_source=share&utm_medium=web2x&context=3
Essentially, week after week I’m noticing deep OTM Puts are being wildly mispriced by 5x, 10x, 20x, even 40x their correct value. Correct value should be based on the bid/ask spread. The value should be the mid way point … so if the active bid/ask is $.40/$.80, and I own one of those Put contracts, it should be worth $60 (midway of $.40/$.80 = $.60 x 100 = $60). We multiple by 100 because each Put contract covers 100 shares. Now the problem is I am routinely seeing multiples of this. If I were a hedge fund, this might cause me to look solvent when, in fact, I might not be solvent at all.
Here’s an example from today (May 21, ’21 $1940P), and it’s different that what I’ve posted before, and I’ll explain how.
So the “Value” on this Put contract is begin carried in my account at $280. In all reality, this Put is sort of worthless. If $BKNG doesn’t go below $1940 by the end of this week, this thing expires worthless. I lose 100% of my premium (my initial cost to buy the contract, which was $64). $BKNG is at $2245 right now … so really, there’s pretty much no chance this ever going to be worth anything, and the options calculator even knows it too because it’s telling me the theoretical value is zero.
Well, maybe there is just a huge bid/ask spread you say. No, there’s not. How do I know? Because when I first logged in to my account this morning, May 21, ’21 $1940P was showing a carry value of $430. See below.
Now I know that ain’t fucking right (let alone all the other bullshit prices above it [again, options calculator tells me these are all theoretically worth zero)]. So you know what I did about our little friend BKNG May 21, ’21 $1940P. I put this piece of shit up for sale for $1.
I even waited a little while to make sure the bid/ask was updated in the market:
And then I checked the carry value in my account again:
$280 now?!! This piece of shit should be at $50 ($0 Bid/$1 Ask should = $50), not $280. That’s really, really wrong. And this is adding actual value to my account, incorrectly. If I were on margin … well, you get why this is a huge problem.
Put carry values are totally fucked, folks. This doesn’t help out retail because most retail traders aren’t carrying deep OTM puts. This example here is fairly minor too ($280 instead of $50). I’ve documented examples where the carry should be $2.50, and it’s $1,000 (https://www.reddit.com/r/Superstonk/comments/mz1yr9/is_it_possible_for_an_account_to_offset_losses/?utm_source=share&utm_medium=web2x&context=3)
You know who’s probably getting fucked the hardest by this — any retail investor long $GME.
As I’ve pointed out in my previous posts on this, you know who carries a ton of Put options in BKNG? Citadel. Are they benefiting from this “glitch” this morning?
But BKNG isn’t the only one. They (and other hedge funds short GME) carry a ton of Puts on all kinds of tickers. And I bet they bought a lot of them for very cheap, and way OTM. The only thing I don’t know is, do they all have fucked up carry values like all the examples I’ve shown. And of course I can’t know this because I don’t own them, and I can’t just look in my portfolio to see what the carry value is.
If Put carry values are fucked up across the board, I’d imagine this “free money” glitch is very helpful in keeping all those books balanced.
So what da fuck is up with options, man???? Inquiring minds want to know!!!!