NewAge Inc (fka NBEVQ) (NBEVQ)

[NewJerichoMan]

The $2.50 rule and PUTs.

We've seen shorts rollover their short position around the beginning of the month for the last 3 months. It'll be interesting if they do it again around December 1st.

Their are no PUTs below $2.50. Also, the $2.50 rule (barring a late month rally) will be in play, which basically states that any share with a price below $2.50, a minimum of $2.50 must be put up for each share short. If the share is $1, $2.50 has to be put up. If the share price goes down to $0.50, that's a 50% gain in terms of share price but only a 20% gain in terms of capital employed ($0.50 / $2.50 = 20%). It basically prohibits shorts from re-loading and shorting a stock to zero. They can still do it but the risk / reward gets skewed.

We don't know who the shorter is. Perhaps it's a well-capitalized short with a strong belief that the company is over-valued based on its fundamentals. If we see the December 1st spike, I think that would be a strike against that theory. No matter how strong one's belief, the risk/reward is skewed.

If one is re-initiating short positions down here, they're probably damn sure on the direction of the stock over the next month. If someone is laundering Coco Libre's shares ahead of schedule, they'd qualify as "damn sure".