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SLS Rates and Recent Option Activity As I posted a few days back (and followed up privately with quite a few), the Short Loan Borrow (and Rebate) rates have spiked and remain relatively* elevated. The last few days have (finally) seen outsized options activity, and not of the reversal/conversion kind. We've seen several hundred call verticals trade (from the buy side) in April and today, 1867 Jan 5 calls traded lifting the am offer and surviving now on the bid. This is reasonably bullish options activity, (the kind I was seeking as a confirmation when coupled with the SLB rate spike). What does this truly suggest or portend? Most likely it is probably generated by smarter shorts taking advantage of what was the options market's persistently low implied volatility. IV's have since jumped 10-15% in the past 10 days. A short-stock position, when paired with long calls, reduces risk and protects against upward price movements. This is a shrewd move in front of next week's CC. Years back, when I had huge short positions in the likes of Baldwin-United and LA Gear, I'd regularly buy OTM calls or call spreads to hedge out some risk. It is a smart play for a number of reasons. Pure speculators probably realized they could take very cheap upside exposure on an absolute basis and acted accordingly as well. For example, to be able to buy a 7 week 4/8 vertical for what was .30-.35c was, in essence a very cheap speculation. As the owner of such, I can tell you you don't see these opportunities and confluences much anymore...especially in the era of HFT and alto-driven market-making. Don't listen to the conjecture crowd if they try to convince you it means a deal is around the corner, because we'd see even a more elevated IV and .05 bids on the near-term OTM calls if that was the speculative case. These price and rate movements aren't yet even close to lending validity to any such assumption. All of this might well amount to squat, or it might not...we shall see. PS.....I will be starting a group to PM my private observations on things related to XON and ZIOP and while I have plenty of names (handles) I regularly communicate with, I am more than happy to add more. PM me if you'd like to join. Don't bother if you've spent much time endorsing the conformationally biased and conjecture-cuffed crowd. I've no more tolerance for that. * relative to the levels found since 12/20/2017 |
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Msg # | Subject | Author | Recs | Date Posted |
100077 | Re: SLS Rates and Recent Option Activity | pharmionphil | 0 | 2/23/2018 2:52:28 PM |
100078 | Re: SLS Rates and Recent Option Activity | Topdog5281 | 0 | 2/23/2018 4:19:03 PM |