Many stocks prices will trade relative to formulas based on option pricing and trading--The difference is that in the case of WMIH the derivative is "embedded"--WMIH has no options based on it's common--The embedded function is relative to the hybrid security--The B's--Basically a convertible preferred-convertible upon a certain action--In this cases a qualified acquisition---The embedded function is tied to conditions such as the restricted cash--The variable for the derivative would most likely be the price of the common--since the B's don't have an active quoted market-At certain price points the embedded function can trigger actions by the players against the variable--In this case the common--This is a way for the hedge funds to make money on the volatility of the common via their ability to control the price-As well as their other motivations for a certain common price point -Once their B's convert to common the embedded function should be released and the highly levered derivative game cease as there should be option trading on the mergered company. This embedded function is relative to WMIH's issued stocks and not to any previous pre-reorganizational stocks of any kind...
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