RE: Options11 Jan 2025 09:17
This is developing into a worthwhile thread. The caveat, of course, is that we have no proof that options trading, specifically 'delta hedging', drove this week's rollercoaster. What we did have were physical trading patterns (waves of trades at specific levels) that are synonymous with options trading. Solid proof is unlikely to arrive. That said, we could yet get repeat patterns that increase confidence, more of which in a minute.
extrader asks, '...are we likely to see a recurrence of such 'animal spirits' if and when there's a 'material' milestone or two..or is this more likely to have been a one-off ?'
A very good question, and one best answered by considering the possible (likely?) positions of 3 participants, namely the options seller, holders of ZIOC blocks (placees, brokers etc) and recent PI buyers.
The option likely still exists and will do until it is either exercised (the buyer purchases his entitled physical stock) or it expires (we know not when). This being the case any repeat surge (like last week's 8p to 12p) would most probably see the option seller again having to buy stocks as upside protection ('delta hedge' again).
I surmised that longer term block holders, perhaps the 5.25 placees from July 1st, had interest to sell at 8p, 9p and 10p, thereby creating chart points, resistance, and trigger points should the level be breached. However..such was the strength of last week's surge (speed and volume) that this supply has likely ended up in the hands of newly arrived PIs and/or us lot topping up ahead of news. Thus, and if so, the resistance levels have now been taken out and offer much less protection to the option seller and his upside exposure.
As to whether we would see a recurrence on a milestone, I think not. I reckon any milestone will provide sufficient upside impetus that we completely clear multi-year highs(think 25p+) at which point the option would have had to be 100% hedged and effectively become a physical position. Besides I would expect incoming volume to swamp our current volume rendering any option a negligible component of overall trade.
yogiananda - like you my options days are well behind me (I'm long only for long term realisation of potential) however I do notice that IG Index offer stock options:
https://www.ig.com/uk/shares/how-to-buy-trade-shares/stock-options
FWIW My working assumption is that any current ZIOC option activity lies close to Shard, via their reputation and the recent 'gerrymandering' of the blocks of shares into close hands at 5.25p on July 1st. That's the source of liquidity for this type of activity, I reckon.
'I wonder sometimes why an aim stock on the rise suddenly tuns negative despite being bullish?' - that's a very long story indeed!
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