The Monthly Game Being Played

[trans]

I have tracked IOC options behavior closely for a while, with some others observing also.  For instance, there is a monthly game being played in the options area concerning the big put positions.  There are approx 20,000 puts (5,000 increments) being traded every month that, imo, are not related to the normal historical options relationships.  They roll monthly around option expiration to the following month.  They normally roll two 5,000 put positions at a time to the next month.  For October, they rolled 5,000 puts into the 60, 65, and 75 strikes and had 2-3k in I believe 57.5 puts.   This week so far, I observed 5,000 60,  5,000 65,and 5,000 75 strike Oct puts rolled into 5,000 55, 60, and 70 Nov puts.  This operation takes more than one  day altogether around each monthly expiraiton.   I observe the 5,000 put positions rolled into "out of the money" puts as well as 5,000 puts into "in the money" puts.  That's what's been going on like clockwork.  This each month involves usually around 20,000 puts equalling 2 million share common positions equivalent.  Now, why are they doing that?

Here's my take on this:  I suspect this is being done by our big shorts.   These option expirations usually see IOC be sold noticeably lower into the expirations each month.  I suspect the trades are done to force the other side of these trade....the options market maker.....to delta hedge those transactions.   His delta hedge on the out of the money 5,000 puts is relatively small, but the in the money delta hedge forces the options market maker to use his short sale "exemption" and sell the common stock to establish his delta hedges.  This is in essence, if I am correct,   a gimmick to put added selling pressure on IOC common along with our big shorts daily selldown into expirations.  If so, its a basic manipulation to drive the price lower and it works well each month, like an atm.

I also observed "lids" being put on IOC each day when needed from Monday Oct 7 thru today.  This is algo related, imo.  They do it continuously when needed all day long.  They usually put equal offers on each of 4 exchanges simultaneously, varying the size to what is need to cap the stock and drive it lower again.

I have also done many years of research in the options area in a modeling career and I can tell you there are NORMAL historical open interest relationships.  So, I first noticed a glaring abnormality between the Interoil lead month call open interest versus the put open interest.  Normal historical COI/POI relationships usually run 1.20 to 1.5 COI to POI.   Recent months in Interoil showed COI/POI relationships running consistently below 1.0 and as low as .8, quite abnormal historically  .  That's when I found the 20k or so 5k positions of POI.  In the last 3 months (at least) this relationship has been accompanied with noticeable selloff in Interoil into the option expirations.   IMO, there are some big bad players exploiting this game to pull off attacks on the common stock and play a big  options  game off of the common stock pricing.  Think about it.  I watch someone screw with this stock pretty much all day long.  But it takes a deeper study than most have the time and experience to do.   Other take offs on this are welcome also.   I don't like what I see and it is quite disturbing...fwiw

[Stavros]

Yes this has been noticed by many folks Trans.

The question is whether it will ever stop?

It seems to me that even if IOC makes a lucrative deal with XOM for 4.6 TCF of gas and a similar deal with XOM or others for the remainder of E/A, the story will continue UNLESS:

1. the big longs, who have been loaning their shares with impunity, call them home to roost.
2. IOC management finally wakes up and does something about it OR
3. IOC management makes a deal to sell the company

What do you think Trans ... Can the ATM be locked down?

[SamAdams]

Silence is Golden($$) except for the true longs.  It will continue until it can't.

[Stavros]

Your comment makes no sense to me Sam ... maybe you can elaborate?

[SamAdams]

Your comment makes no sense to me Sam ... maybe you can elaborate?

Simply referring to Trans' post.  Hopefully we are getting close or they will grind this lower still.

[ArtM72]

Silence is Golden($$) except for the true longs.  It will continue until it can't.

I suppose we are begging the question why would the big players ever care to see this deal go through so long as commissions continue to generate from options, rent continues to generate at the loan counter and far more expensive gas limps to market?  I'm beginning to see the magic of this resource: its ability to remain harmlessly buried underground while generating untold millions above the surface.

Should have started loaning my shares long ago.

[TomCrooz]

Silence is Golden($$) except for the true longs.  It will continue until it can't.

I suppose we are begging the question why would the big players ever care to see this deal go through so long as commissions continue to generate from options, rent continues to generate at the loan counter and far more expensive gas limps to market?  I'm beginning to see the magic of this resource: its ability to remain harmlessly buried underground while generating untold millions above the surface.

Should have started loaning my shares long ago.

There are a few on this board (who profess their undying love for IOC) with some pretty sizeable positions who have loaned shares to the shorts.  I expressed my extreme displeasure concerning those transactions to some of the SHU heirarchy in hopes that it would reach those lenders.  Kind of like standing around the craps table betting on the PASS or COME line,  Everyone is rooting for the shooter.  Then some guy steps up and bets the DON'T PASS or DON'T COME line.  Not the favorite guy at the table...he wins if everyone else loses.

[petrengr1]

I have tracked IOC options behavior closely for a while, with some others observing also.  For instance, there is a monthly game being played in the options area concerning the big put positions.  There are approx 20,000 puts (5,000 increments) being traded every month that, imo, are not related to the normal historical options relationships.  They roll monthly around option expiration to the following month.  They normally roll two 5,000 put positions at a time to the next month.  For October, they rolled 5,000 puts into the 60, 65, and 75 strikes and had 2-3k in I believe 57.5 puts.   This week so far, I observed 5,000 60,  5,000 65,and 5,000 75 strike Oct puts rolled into 5,000 55, 60, and 70 Nov puts.  This operation takes more than one  day altogether around each monthly expiraiton.   I observe the 5,000 put positions rolled into "out of the money" puts as well as 5,000 puts into "in the money" puts.  That's what's been going on like clockwork.  This each month involves usually around 20,000 puts equalling 2 million share common positions equivalent.  Now, why are they doing that?

Here's my take on this:  I suspect this is being done by our big shorts.   These option expirations usually see IOC be sold noticeably lower into the expirations each month.  I suspect the trades are done to force the other side of these trade....the options market maker.....to delta hedge those transactions.   His delta hedge on the out of the money 5,000 puts is relatively small, but the in the money delta hedge forces the options market maker to use his short sale "exemption" and sell the common stock to establish his delta hedges.  This is in essence, if I am correct,   a gimmick to put added selling pressure on IOC common along with our big shorts daily selldown into expirations.  If so, its a basic manipulation to drive the price lower and it works well each month, like an atm.

I also observed "lids" being put on IOC each day when needed from Monday Oct 7 thru today.  This is algo related, imo.  They do it continuously when needed all day long.  They usually put equal offers on each of 4 exchanges simultaneously, varying the size to what is need to cap the stock and drive it lower again.

I have also done many years of research in the options area in a modeling career and I can tell you there are NORMAL historical open interest relationships.  So, I first noticed a glaring abnormality between the Interoil lead month call open interest versus the put open interest.  Normal historical COI/POI relationships usually run 1.20 to 1.5 COI to POI.   Recent months in Interoil showed COI/POI relationships running consistently below 1.0 and as low as .8, quite abnormal historically  .  That's when I found the 20k or so 5k positions of POI.  In the last 3 months (at least) this relationship has been accompanied with noticeable selloff in Interoil into the option expirations.   IMO, there are some big bad players exploiting this game to pull off attacks on the common stock and play a big  options  game off of the common stock pricing.  Think about it.  I watch someone screw with this stock pretty much all day long.  But it takes a deeper study than most have the time and experience to do.   Other take offs on this are welcome also.   I don't like what I see and it is quite disturbing...fwiw

Will they try to close it below 65 or 62.50 tomorrow? Big open interest in the 65 puts but not very big open interest in the calls at that level.

[tarulestheday]

There are a few on this board (who profess their undying love for IOC) with some pretty sizeable positions who have loaned shares to the shorts.  I expressed my extreme displeasure concerning those transactions to some of the SHU heirarchy in hopes that it would reach those lenders.  Kind of like standing around the craps table betting on the PASS or COME line,  Everyone is rooting for the shooter.  Then some guy steps up and bets the DON'T PASS or DON'T COME line.  Not the favorite guy at the table...he wins if everyone else loses.

I have been castigated many times for pointing out the hypocrisy of enabling the shorts to further manipulate the stock by share lending. You can tell who is doing it by their extremely defensive reactions.  The standard response is that they intend to call their shares back on a deal announcement. However, the shorts are using borrowed shares to further drive the baseline price down prior to any sell down event. I would personally be alot happier with a baseline of $75-85 prior to the sell down rather than the low $60 range we are stuck in now primarly based on short manipulation.

Many of the IOC shorts are true criminals. Aiding the short cabal is the last thing longs should be doing in light of all of the other issues facing IOC investors.

[trans]

fwiw from Trans

A little update here in the middle of an option roll to Nov new lead month.   Doing an approx count out of curiosity, shows about 14,600 Nov call open interest and 20,100 Nov put open interest on today's reading.  this will change somewhat til rollover is completd.  But that's a NOV COI/POI ratio of around .73,  very biased to put side and historically abnormal.  Now take out big POI positions that were rolled earlier this week (12,300 approx) and the COI/POI ratio comes out a a very normal 1.87 COI/POI.

So, if you want to figure out what's wrong here in the options area, you can see the big POI's rolled earier this week stand out like a sore thumb.......figure that out and you reveal some of the problems in IOC trading......fwiw