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
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.
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.
Hmmm , what a weird trade. I donât 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