Replies to post #7581 on Value Microcaps Junior Miners

[nsomniyak]

The couple weeks coming into options expiry are often good days to buy with lowball orders.

I do NOT think that warrant holders will exercise warrants and then immediately sell the stock. Rather, I think they will sell their existing holdings, then refresh them through exercising the warrants, or even SHORT the stock now and cover with the shares purchased through warrant exercise in the days before 2/18.

Anyone sophisticated enough to have participated in a PP, and be holding those warrants, is clearly also sophisticated enough to know this, and will have the ability to short NGG if needed. The underwriter has their names and contact info, and I am sure they follow up to offer a full range of exit or conversion strategies.

The point here is that the mechanics for these guys is sell first, then replenish and/or cover. That means downward pressure on the stock going into expiry. There is more such pressure if the warrants are publicly traded (don't think the NGG warrants are, but not sure) as in that case there's also a straight arb opportunity.

The second order effect here is that the market can see that this will happen. Traders who don't hold the warrants, and who may have no interest either way in NGG long term, can read the calendar and come to this same conclusion. Some of these traders will pile in on the short side simply figuring to play a prospective price dip into expiry.

The third order effect is that some investors (such as myself in this case) have had NGG on their radar for a while but have delayed buying in figuring that the warrant expiry would offer a better entry price. Some of this pent up demand comes out as buys in the market as we near and move through the expiry date.

After warrant expiry (and, presumably, conversion since in the money), the artificial (not a function of company fundamentals) pressure to sell high now and buy back lower later induced by a calendar event is gone.

There can even be a bounce as any shorts that piled in cover their trades.

Personally, I like the NGG story and will try to pick up some shares on weakness over the next 10 days.