Can someone who knows options comment on this post from Amarin FF group page. From this morning.thanks
Almost 2000 years ago, today was a day of despair to the followers of Jesus. A day of despair, because they didn’t understand what was really happening, and what was about to happen for them. I think the same is true today and I am going to try and share some thoughts with you regarding Amarin.
I used to be a cop. I was trained to look for clues. The clues tell the story. I am going to point out a few clues some of you may have missed this week.
First, the players: A-the company looking to be acquired, B-the long suffering investors in “A”. C- the clients of “G” ( who always come out on top). D- the judge who makes a bad decision in a court case involving “A”. F- the company looking to buy “A”. G- the financial orchestrator of the deal. T-the tax man, who always gets paid.
Our scenario: “A” wants to raise money. They go to”G” who sells “A”’s stock to “ C” at $18 a share. “B” believes that “F” is going to buy “A”. A joker pops up in the deck when “D” makes a bad court ruling on Monday night, and the stock of “A” crashes down to $4 a share.
As “A”s stock is crashing down Tuesday morning, an unknown entity purchases 20,000 option contracts with a $12 strike price that expire on 4/17. These are purchased for .02 a share. Then, an unknown entity purchased 30,000 option contracts with a $13 strike price for .02 a share and they happen to expire on 4/17 also. In order for these contracts to be good the stock has to at least triple in price in two weeks! Pretty risky business? Maybe not!
Understand this, in order to sell 20,000 option contracts the seller would need to own 2 million shares. This block of 20,000 contracts was sold in one transaction. The block of 30,000 contracts was also sold in one transaction and that seller would have had to own 3 million shares. While this was going on, someone was acquiring shares at about $4 while everyone else was selling. By the end of the day Tuesday 114 million shares were sold. By the end of the day Wednesday another 97 million shares were sold.
If “G” were the buyer of shares at $4, they could have sold the $12 options. They would also make a 100% a week profit, (for 2 weeks) if those calls were exercised. They stand to make more than that on the $13 calls if they are exercised.
A closer look at the “A” options last Saturday revealed that there were 498,003 option contracts out on the company expiring from 4/17/20 until 1/22/22. Of the 498,000 contracts, 277,153 contracts (55%) will all expire on the same day, 4/17/2020.
If “F” were to bid $100 a share to acquire “A”, then “A”s share price would go to just about $100 almost immediately. If that were to happen, the . 02 investments in the $12 option would be worth about $88 each and the .02 investment in the $13 call would be worth about $87 each. ($100 share-$12 strike=$88 and $100 share - $13 strike =$87) Remember, the unknown buyer, of the $12 options, bought 20,000 contracts which represent 2 million shares at $12 strike price. A $40,000 investment would return $176 million. The unknown buyer of the $13 options would invest $60,000 and would return $261 million.
Are you following the clues? Do you see what’s happening here? It even more astonishing when you look further up the option chain. Some of the higher strike prices, $14, $15, $16, $17, $18, $19, $20, $25 etc. were selling for .01 after the meltdown on Tuesday. There are over 73,000 contracts ( representing 7.3 million shares) out on the $20 strikes and over 39,000 contracts (representing 3.9 million shares) out on the $25 strikes.
If you were “F” and you were to bid $200 a share, your profit per share more than doubles because you do not subtract the strike price from the additional $100. ($100 bid -12 strike=$88 but the $200 bid -$12 strike =$188. Also a $300 bid -$12 strike =$288.) Remember this is for every .02 you invest . Your return on a $300 bid would be $14,400 for every penny!
Realize this: 1) if you are “F” you are in total control of your profits. It’s not a risk to put up the option money if you know you are going to make the bid. In fact the 277,000 option contracts represent over 27 million shares and a lot of these contracts were bought AFTER “D”s decision. 2) Just like buying a house, you never put the entire price up out of your own pocket. You put up the down payment and finance the rest. Buying the options at .02 and .01 would certainly be a way of raising the down payment. 3)Keep in mind that a potential buyer of Amarin just went to the bond market, the Friday before “D”s decision, and borrowed $1.2 billion at 2.6% for 10 years. They did this with over $39 billion in their bank account. Could they have been testing the waters? 4) could “G” have orchestrated the deal, and now “C” walks away with a tremendous profit on their $18 investment, if the bid is $100 or more? 5) the entire week, everyone’s attention was on the appeal of “D”s decision and this went on right out in the open. Are we about to get an offer on Monday morning? Is that the real reason for the press conference on Monday afternoon? One thing is for certain: if it does happen, everyone walks away happy and “T” stands to receive between $10 billion to $40 billion in taxes.
Its always darkest right before the dawn! What we thought was going to be the death of us, “D”s decision, may, in fact, be our saving grace. It makes this whole scenario possible. Easter is all about renewal. I believe God has not forsaken us. Happy Easter! I cannot wait until Monday! Good luck to us all!
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