...It's probably time to brush up on the Jacobins and the Committee of Public Safety.Well, to date we haven't seen a Robespierre emerge but we do have this bit from ZeroHedge on forcing options market makers to hedge their exposure, similar to the way futures market makers were forced to buy components of the XMI in '87.
Maybe the history of the XMI on October 20, 1987 as well.
More to come as the summer progresses....
And a note to our readers from the CFTC and SEC: we love you underpaid bastards and as a possible career enhancer would offer up NDX futures (and the options on said futures) as an area of especial interest over the next few months.
From ZeroHedge, July 15:
The TSLA Call-Buying Scheme Is Not Working Again Today
....We detailed one reason why TSLA has been seeing this incessant opening panic-bid previously.......MORE
One topic that is occasionally brought up by Tesla skeptics, but rarely examined in depth, has been a litany of out of the money call buying in the name that appears to be occurring, relatively aggressively, on a weekly basis.
While the buying could be attributed to normal market forces, a new article by Dan Stringer looks into the specifics of one such trade that took place last week, where it appeared that over $2.5 million was deployed in a very short term, very out of the money options buy.
...
The author then lays out that OCC rules dictate that the clearing house must have a certain percentage of this stock on hand to deal with the calls should they move into the money. He estimates a 20% ratio:
The broker-dealers need to have some margin level (per Rule 601 of the OCC rules); this can vary by broker-dealer and is subject to calculations with these rules. I have heard a typical ratio is roughly 20% on hand, so for the purpose of this exercise, I will use that.From there, he determines that the options buy would trigger a purchase of 716,000 Tesla shares to cover the trade. He also notes the timing of the transaction, pointing out that "broker-dealer margin requirements are sent out by 10:00 am EST, or within the first ½ hour of trading" and arguing that this could cause a spike at the cash open.
This would create a potential spike in buying at the open, causing shares to spike. The following 12,800 options would then require a further 256,000 shares to be purchased using the same margin requirement methodology....
The author concludes by stating that the options buy could be a "relatively inexpensive" way to generate some forced buying in Tesla.
For a large-cap company like Tesla with the volume of shares that have been trading over the last several months, this option position would be a relatively in expensive cost to generate some forced buying, at a cost of just 5% of the open position.....
