Strange "put" buying

[js253]

May $6 and $8 puts have seen explosive buying the last two days, with both contracts expiring on the 17th.

I don't see it as hedge, since the strike is so far below the already beaten down stock price, the "hedger" may lose money on both the stock and the put premium. two possible theories

1. Less likely

Shorts trying to raise fear , buying far OTM put is a cheap way of doing that

2. More likely

In conjunction with the weak price action this afternoon in light of a significant 13G. Another short attack coming. MW may release yet another "report" over the weekend to rattle frail longs.  Tipped off put buyers can easily double/triple their money selling into the ensuing panic.

Any thoughts?

[M1DD]

I think this is solely a hedge in case the IAC comes back dirty. I own a small amount of April $8 puts and have a hugely long position in Jan 2015 calls.

Yeah the stock price has been beaten down but you haven't seen the half of it if NQ is found fraudulent in any manner - stock will go to $5/share on the slightest whiff of inaccuracies and $1-2/share if fraudulent...

[js253]

I think this is solely a hedge in case the IAC comes back dirty. I own a small amount of April $8 puts and have a hugely long position in Jan 2015 calls. Yeah the stock price has been beaten down but you haven't seen the half of it if NQ is found fraudulent in any manner - stock will go to $5/share on the slightest whiff of inaccuracies and $1-2/share if fraudulent...

In total between the two strike price, nearly 100k(10 mil shares) new contracts were bought to open AFTER NQ's 4/30 update. Did that update suddenly make the fraud case more likely in your opinion? A better time to purchase that put(as a hedge) would have been b4 4/30 when ppl were on the edge of their seats.

[Bondguy8]

I do not find the put buying strange at all.  The 6 puts are a very cheap option with the potential for a convex payoff.  If anyone thinks they don't file 20F by 15th then hose are a great way to express that view.  These 10 cent options can pay off handsomely.  If I were a short (I'm not) I would rotate out of my short stock and buy those puts.  No need to worry about a short squeeze and my max loss is capped.  There is a defined event date and this date is essentially binary for the 6 put.  If NQ files puts are woth zero and if they dont file stock gets halted and possibly delisted.  Risk reward is very favorable in that trade.  That being said, I believe company files on time and those buyers lose their premium.  Anyone that is a bull and believes the most recent press release should be happy to sell the 6 puts to a lottery ticket buyer.

[js253]

agree on the "spec" nature of the purchase, but the volume of purchase makes it seem like more than just a complete hail mary.

[AlphaMine]

Two things to consider.

First is that the 8s could be protection for a myrad of strategies.  For example if i was going to sell the May 12 Puts to pick up $1.60 which is $16K against 10K shares.  This woud be a great way to start rebuilding a long position if you were bullish.  However because there is a possibility of NQ not filing on time or other trouble, buying the May 8 gives you cheapmprotection against a massive loss.

Second, always revert to KISS.  Usually when someone is buying options the reason is they think they will make money as opposed to having some convoluted strategy.  In this example, if you had bought a HUGE pile of the May 6 puts, you would be up 50% on your investment on todays move.  If the stock drops another $1 you will probably be up 150%!  Those are nice returns if you aske me

For the people who are holding May puts, the ones holding the May 6 strike made the most returns by a large margin, the next closest holder made 20% compared to the May 6's 50%.  So if you can buy large enough blocks of the May 6 without driving the price up on yourself, you could do VERY well on that gamble.

[Haggerston]

If you're bullish on the company and 20-F (which most of us are) it's not a bad idea to sell those $8 puts. High probability they will expire worthless.

[Fundy_]

MW may release yet another "report" over the weekend to rattle frail longs.

Should be noted that MW is currently out, at least as of his last SA disclosure, but he is continuing to attack the company on various mediums. I'm not sure if it's his attempt at saving face or that he's brewing another big attack, only time will tell. I have said this plenty of times before but if you truly believe in the long term outlook in this company then short attacks don't really matter. As the revenue continues to grow and they start putting more of that into their bottom line, on top of their audit results, the price will pick back up in the long term.

[tacitusk]

MW may release yet another "report" over the weekend to rattle frail longs.

Should be noted that MW is currently out, at least as of his last SA disclosure, but he is continuing to attack the company on various mediums. I'm not sure if it's his attempt at saving face or that he's brewing another big attack, only time will tell. I have said this plenty of times before but if you truly believe in the long term outlook in this company then short attacks don't really matter. As the revenue continues to grow and they start putting more of that into their bottom line, on top of their audit results, the price will pick back up in the long term.

He is still short, the artical initiially stated (incorrectly) that he held no position so that's probably what you remember. It's been updated since.

[Fundy_]

MW may release yet another "report" over the weekend to rattle frail longs.

Should be noted that MW is currently out, at least as of his last SA disclosure, but he is continuing to attack the company on various mediums. I'm not sure if it's his attempt at saving face or that he's brewing another big attack, only time will tell. I have said this plenty of times before but if you truly believe in the long term outlook in this company then short attacks don't really matter. As the revenue continues to grow and they start putting more of that into their bottom line, on top of their audit results, the price will pick back up in the long term.

He is still short, the artical initiially stated (incorrectly) that he held no position so that's probably what you remember. It's been updated since.

Oh, thanks for the clarification, that makes more sense.