07-24-2012, 05:52 AM
If you look at the 28K $100 September calls, this appears to be the primary hedge for the shorts. However, with approx 9 million shares short, these calls represent roughly 2.8 million long shares (assuming IOC trades over $100 by Sept 21st). Basically, this is a 31% hedge assuming $100 share price. Point is that this is not a very substantial hedge IMO. IOC could really destroy the shorts by trading just south of $100 in Sept. It would be supremely entertaining to see a $99 close on Sept 21st which would be brutally painful on both sides of the trade for shorts. This hedge starts to make more sense assuming IOC blows through the $100 strike and gives them another 30% boost around $130/share. Interesting times to be long IOC.