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DFV bought a call option to buy 500 blocks of 100 shares (so 50,000 shares in total) at $12 at any point before April 16th
How does this part work then? Can DFV just say "yeah I'll buy those shares now for $12 each, thanks!" and the other end of the transaction has to sell at that point or can the person on the other end specify the time to sell and DFV has to buy at $12 a share regardless of market price? Basically who has the power here?
Arducius-
How does this part work then? Can DFV just say "yeah I'll buy those shares now for $12 each, thanks!" and the other end of the transaction has to sell at that point or can the person on the other end specify the time to sell and DFV has to buy at $12 a share regardless of market price? Basically who has the power here?
DFV
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Can DFV just say "yeah I'll buy those shares now for $12 each, thanks!" and the other end of the transaction has to sell at that point
I believe it's this
Greenbank
tb
Shorts don't have any expiry.
The person shorting has to pay a borrowing cost to the owner of the share. This is variable (based on lots of things) but it's around 30% per annum for GME right now (and that's against the current stock price, not the price the share was when it was borrowed). This is paid until the share is returned to the original owner.
So, if there are 60mm shares being shorted and the share price is $300 then that's $6.3bn per year in borrowing costs, or about $17mm a day across all 60mm shares. So that's roughly $0.25 per share per day for the shorters.
Options (calls/puts) DO have expiry dates. New options become available each week on a Friday and will cover a range of time spans. But it means that each Friday a bunch of options will be expiring. There are about 100,000 options that expire today, mostly on the buy side, so that's definitely going to be more petrol on the fire.
So today there will be a bunch of people who bought call options who might want to exercise them today or lose that option forever. Lots of these will have been bought when the price was way down ($50 or below) and so it would be stupid not to exercise them as it means you buy a number of shares for a pre-determined price (I think the highest call options for GME expiring today are for $110 or so, no idea for puts) and then you can immediately sell them for instant profit (finding a buyer on the open market does not seem tricky given everyone wanting to pile in).
On the other side whoever sold that call option is in deep deep shit. Either they have covered their position earlier (before the price rocketed) and bought shares that they can hand over, or they now have to buy on the open market (~$300+) in order to sell to someone at $110 (or lower in many cases).
DFV bought a call option to buy 500 blocks of 100 shares (so 50,000 shares in total) at $12 at any point before April 16th. Doesn't take much to work out the profit on that. Whoever sold those calls is properly fucked (unless they can short it on the way back down to make the money back, hence the feedback loop GME is stuck in).