That was exactly my point. $50k underlying value for a high-roller investment firm isn’t plausible. $500 million is where those people play.
They knew they were going to get found out. Had it worked, they would’ve taken the money and fought it out in court when the pressure mounted. But it didn’t and they tried to cover their tracks.
The shares were and are worth ~ $34 each, making the number of shares subject to the put worth about $408million. Let’s say they wrote the put at that price. If the shares went to $0, they could still exercise the put and profit ~ $400,000,000. The share price usually doesn’t go negative, so the maximum profit is the number of shares multiplied by the contract price, which is usually not far from the market price at the time the put was written: nobody is going to sell a put at far above market price, and nobody is going to buy a put at far below market price.
These are the kinds of numbers that appeal to the high-rollers since the put premium isn’t that significant (to them). $400,000,000 underlying value interests them. $50,000 is lunch money and a firm catering to heavy hitters isn’t going to waste time with such small potatoes unless they’re maybe training a summer intern.
So the claim that it was 1,200 shares and not 12,000,000 that they wrote the put for isn’t plausible. At least not in my opinion.
Right. An investment company with a big list of very wealthy clients is piddling around with puts on 1,200 shares with an underlying value of < $50k.
I call bullshit — that’s not an “investment”.
That was exactly my point. $50k underlying value for a high-roller investment firm isn’t plausible. $500 million is where those people play.
They knew they were going to get found out. Had it worked, they would’ve taken the money and fought it out in court when the pressure mounted. But it didn’t and they tried to cover their tracks.
Crooks who knew what was up.
Probably not on the put option.
The shares were and are worth ~ $34 each, making the number of shares subject to the put worth about $408million. Let’s say they wrote the put at that price. If the shares went to $0, they could still exercise the put and profit ~ $400,000,000. The share price usually doesn’t go negative, so the maximum profit is the number of shares multiplied by the contract price, which is usually not far from the market price at the time the put was written: nobody is going to sell a put at far above market price, and nobody is going to buy a put at far below market price.
These are the kinds of numbers that appeal to the high-rollers since the put premium isn’t that significant (to them). $400,000,000 underlying value interests them. $50,000 is lunch money and a firm catering to heavy hitters isn’t going to waste time with such small potatoes unless they’re maybe training a summer intern.
So the claim that it was 1,200 shares and not 12,000,000 that they wrote the put for isn’t plausible. At least not in my opinion.