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I love the concept, but I think if he goes over 5% ownership he has to file with the SEC, if he exercises all his current calls he will be at 4.8% ownership if I’m not mistaken…. I’m gonna go eat a green crayon now 🫡
Love the whole theory, totally plausible and damn smart.
Do we know if there's any kind of SEC requirement for exposure to certain percentage? Like, he can afford it, but it feels crazy to assume no one would step in if he had exposure to 100m shares, almost 30% of the company with calls.
~~I am not aware of any through option exposure, hope someone who knows can pitch in.~~ See SubParMarioBro's comment below for option exposure reporting requirements.
The requirements for beneficial ownership that happens upon acquiring 5% or more of voting stocks is filing a 13D within 5 days, but in this scenario since he is not buying or exercising, he won't have to do it based on just his equity position.
As I mentioned to you earlier, the options contracts count the same as actual shares as far as the SEC and section 13 are concerned.
Here’s the relevant section of legal code:
> A person shall be deemed to be the beneficial owner of a security, subject to the provisions of paragraph (b) of this rule, if that person has the right to acquire beneficial ownership of such security, as defined in Rule 13d-3(a) (§ 240.13d-3(a)) within sixty days, including but not limited to any right to acquire: (A) Through the exercise of any option, warrant or right..
https://www.law.cornell.edu/cfr/text/17/240.13d-3
Back when RC got tripped up by a share buyback and was made an insider of towel, a significant portion of his position was made up of call options.
risky. if he changes his positions out too high, like say 50c he could be in danger of the mm not hedging and rather shorting the shit out the stock hammering it out of money. and the higher his strike price, the more shares he "could" buy but the more money he needs to do it. his power lies alot in the ability to actually execute his calls.
i am very smooth tho. this is all quite beyond me. i buy, i hold , i drs, i watch the kitty make moves.
But this is assuming they are actually hedging. If they don’t, RK just bought a whole bunch of calls that diluted the number of shares he could have received since he would have a higher price to exercise—all the while the MMs are tanking the price.
This is purely my interpretation, but when I look at his last post from 2021, and what he has now, I think he 6X-ed his position by playing the May spike, and exercising those calls into options. If he did that, and he has done so before, it is reasonable to expect that MMs will be hedging actively.
And as noted, if they are not hedging, he still gets those shares on the cheap, and then use profits to buy up even more shares. Except in that case, MMs are caught with their pants down and have to FTD 10's of millions of shares.
One of things MMs are required to do is act as a counterparty when no actual seller exists. If there are no sellers, they will be forced to provide an ask. And because there are so many strikes, so much activity and IV is so high, they can't offer a bullshit ask either.
Isn’t the issue that people were selling their call options as opposed to exercising them?
Exercising them requires immediate market discovery as opposed to purely dealing in derivatives.
I’d love this to be true but it seems unlikely.
So, he can’t quite do that as he definitely needs to not buy enough to get designated as an insider (10%). There might even be a reason he stopped at 4.85% rather than continuing to buy options and hit the 5% mark where he’d have to declare his position.
But at 10% his ability to trade would be severely impaired.
Options still count as beneficial ownership in these calculations, same as shares. It’s goofy but that’s how it works.
You can have a position that is entirely options and still get designated an insider.
At 17,550,000 controlled share he hits 5%. At 35,100,000 he’d hit 10%. He’s currently at 17,000,000.
Not allowed.
> All Insiders are prohibited from selling short (including, short sales “against the box”) or from trading, writing, or purchasing “put” or “call” options on the Company’s stock whether or not such options are traded on an exchange.
https://www.sec.gov/Archives/edgar/data/1164964/000101968715004168/globalfuture_8k-ex9904.htm
Interesting. Does that prevent him from acquiring additional shares or options? Or is it incumbent on him to simply file the paperwork, and he's good to go?
I don’t know about the 5% rules. All I’m aware of is that he’d be required to disclose his position.
At 10% there’s very onerous restrictions on what he can do, which he absolutely does not want. Insiders can’t buy options, hell he wouldn’t even be allowed to trade shares until after earnings.
Not really - my macro/fundamental view remains the same. However, RK showing up and the reality of his positions makes for a fascinating short term play.
Orrr hear me out, if these calls are exercised he will effectively own almost 5% of the company, becoming an activist investor and possible a seat on the board and will have major influence in company decisions… he won’t need many more shares to be at 5% BTW
This is most likely what is going to happen.
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I love the concept, but I think if he goes over 5% ownership he has to file with the SEC, if he exercises all his current calls he will be at 4.8% ownership if I’m not mistaken…. I’m gonna go eat a green crayon now 🫡
Ah but that's the beauty of this - he never exercises. He simply sells the 20Cs and rolls them up to 50Cs or higher.
Love the whole theory, totally plausible and damn smart. Do we know if there's any kind of SEC requirement for exposure to certain percentage? Like, he can afford it, but it feels crazy to assume no one would step in if he had exposure to 100m shares, almost 30% of the company with calls.
~~I am not aware of any through option exposure, hope someone who knows can pitch in.~~ See SubParMarioBro's comment below for option exposure reporting requirements. The requirements for beneficial ownership that happens upon acquiring 5% or more of voting stocks is filing a 13D within 5 days, but in this scenario since he is not buying or exercising, he won't have to do it based on just his equity position.
As I mentioned to you earlier, the options contracts count the same as actual shares as far as the SEC and section 13 are concerned. Here’s the relevant section of legal code: > A person shall be deemed to be the beneficial owner of a security, subject to the provisions of paragraph (b) of this rule, if that person has the right to acquire beneficial ownership of such security, as defined in Rule 13d-3(a) (§ 240.13d-3(a)) within sixty days, including but not limited to any right to acquire: (A) Through the exercise of any option, warrant or right.. https://www.law.cornell.edu/cfr/text/17/240.13d-3 Back when RC got tripped up by a share buyback and was made an insider of towel, a significant portion of his position was made up of call options.
Thanks for the source! Have edited by comment.
Ah! Did not catch that! Genius. 👏
risky. if he changes his positions out too high, like say 50c he could be in danger of the mm not hedging and rather shorting the shit out the stock hammering it out of money. and the higher his strike price, the more shares he "could" buy but the more money he needs to do it. his power lies alot in the ability to actually execute his calls. i am very smooth tho. this is all quite beyond me. i buy, i hold , i drs, i watch the kitty make moves.
Definitely agree that this requires price to hold, which means people need to hold.
You nailed it.
But this is assuming they are actually hedging. If they don’t, RK just bought a whole bunch of calls that diluted the number of shares he could have received since he would have a higher price to exercise—all the while the MMs are tanking the price.
This is purely my interpretation, but when I look at his last post from 2021, and what he has now, I think he 6X-ed his position by playing the May spike, and exercising those calls into options. If he did that, and he has done so before, it is reasonable to expect that MMs will be hedging actively. And as noted, if they are not hedging, he still gets those shares on the cheap, and then use profits to buy up even more shares. Except in that case, MMs are caught with their pants down and have to FTD 10's of millions of shares.
You think he will drink a beer on the stream?
Maybe once 4pm EST hits. Till then, he might need energy drinks to stay sharp!
I’m too high to understand this
Same
I'm not high enough to understand this
sell? what's that
How do we know there's a seller for 320k calls at $50+?
One of things MMs are required to do is act as a counterparty when no actual seller exists. If there are no sellers, they will be forced to provide an ask. And because there are so many strikes, so much activity and IV is so high, they can't offer a bullshit ask either.
My question exactly
This is a possibility I have considered too. It’s a reasonable strategy.
Holy fuuuuuck
Isn’t the issue that people were selling their call options as opposed to exercising them? Exercising them requires immediate market discovery as opposed to purely dealing in derivatives. I’d love this to be true but it seems unlikely.
So, he can’t quite do that as he definitely needs to not buy enough to get designated as an insider (10%). There might even be a reason he stopped at 4.85% rather than continuing to buy options and hit the 5% mark where he’d have to declare his position. But at 10% his ability to trade would be severely impaired.
He's never buying or exercising shares :) He's rolling the options up. It's the MMs who are buying because they have to, to hedge.
Options still count as beneficial ownership in these calculations, same as shares. It’s goofy but that’s how it works. You can have a position that is entirely options and still get designated an insider. At 17,550,000 controlled share he hits 5%. At 35,100,000 he’d hit 10%. He’s currently at 17,000,000.
What about selling cash covered puts?
Not allowed. > All Insiders are prohibited from selling short (including, short sales “against the box”) or from trading, writing, or purchasing “put” or “call” options on the Company’s stock whether or not such options are traded on an exchange. https://www.sec.gov/Archives/edgar/data/1164964/000101968715004168/globalfuture_8k-ex9904.htm
Interesting. Does that prevent him from acquiring additional shares or options? Or is it incumbent on him to simply file the paperwork, and he's good to go?
I don’t know about the 5% rules. All I’m aware of is that he’d be required to disclose his position. At 10% there’s very onerous restrictions on what he can do, which he absolutely does not want. Insiders can’t buy options, hell he wouldn’t even be allowed to trade shares until after earnings.
https://preview.redd.it/xiu78hltg35d1.jpeg?width=1068&format=pjpg&auto=webp&s=28d5b08c4bf039d4c0552d21930f04e6b4a4577a
[удалено]
Decided to change your narrative, eh?
Not really - my macro/fundamental view remains the same. However, RK showing up and the reality of his positions makes for a fascinating short term play.
Orrr hear me out, if these calls are exercised he will effectively own almost 5% of the company, becoming an activist investor and possible a seat on the board and will have major influence in company decisions… he won’t need many more shares to be at 5% BTW This is most likely what is going to happen.
That's certainly possible. But since I'm theorycrafting, might as well add some fireworks to it! :)
i think your delta hedging calculation is off
320 x .08 would be 256k shares, not 25 million.
320K contracts is equivalent to 32M shares. 80% of 32M is 25.6M. :)
He’s not doing anything other than buying shares in his favourite company.. if they sold calls naked. That’s on them
This play works independent of whether tutes/hedgies sold calls. :)
What if his 5 million shares are currently on loan... And he recalls them while executing his options.... ....B O O M