Option Activity in Sirius XM Presents Interesting Options 25 comments
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by Brandon Matthews
Normally, I view increases in call options as a bearish indicator. As a monthly event, we witness stocks held below their strike prices as options expiration dates draw near. Typically, the writers of option contracts are high rolling firms and individuals which have the power to suppress the stock prices so that the contracts expire worthless. On occasion however, no amount of short selling and manipulation can stop a runaway train. We witnessed such an event last week as the S&P soared above its strike price which led to massive short covering. The recent spike in Sirius XM Radio’s (SIRI) call options, however, may prove to be another exception to the rule.
Looking at the big picture, we can see that shares of SIRI have been on a tear, and the second half of the year certainly seems promising enough that the company may deliver exceptional results in the not too distant future. The idea that SIRI common stock will reach a dollar by the end of the year is certainly plausible. Short interest continues to wane as the newest data indicates that SIRI short interest is now at a multi-year low. In the case of Sirius XM Radio, the common stock is predominantly held by retail investors, rather than institutions. In fact, there have been several articles written in the past year that have suggested that retail investors could lower their cost basis and make extra money by writing covered calls against their long positions. Can you say “sucker”!? Short interest declining on call options rising? That should certainly raise a flag.
For starters, writing a covered call provides a hedge for short sellers, significantly reducing their risk by providing them a cap on their potential losses. The market has a knack for taking the most money from the most people, which tends to be the retail investor in most cases. The predominant options that are being purchased are $1.00 calls. So who is writing these contracts and who is buying them?
Because most call options are covered calls, we must assume that the contracts have mostly been written by retail investors, and firms such as Goldman Sachs (GS) have not hesitated to pick up a few hundred thousand for themselves. The recent increase in activity can also likely be attributed to institutions purchasing these $1.00 calls. We already know that some of the bigger institutions have taken large new stakes in the equity. As we witnessed last week, there were very few shares available on the sell side of the ledger which resulted in Sirius XM shares rising significantly higher. If the institutions are looking to take back control of SIRI shares from the retail investor, these call options offer them the perfect opportunity to do so. As easily as these large institutions can suppress a stock's value, they can easily raise the value as well. [click to enlarge]
In my opinion, the street is setting itself up for a significant run up in the price of Sirius XM shares for the fourth quarter, and they will have purchased the bulk of those shares for as little as a nickel to ten cents per share from unsuspecting Sirius retail shareholders.
Position: Long SIRI
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I appreciate your opinions, despite the length. You're one of the few who offer analysis versus meaningless ranting.
Thanks
We all know to buy on the dips and SIRI has one on the way.
SIRI has only 9 day to make it to 1.00 before the NasDq send out the noncompliance letter. When the news hits the negative media is going to be all over it. I can see SIRI trading 40 – 50 cents.
We will need to wait and see what Mel does before we can predict how low the dip will go. If he delays and puts up a fight to get SIRI trading 1.00 than the dip will be shallow and recovery will be fast. However, his plan of Dec 18, 2008 is to go direct for the split.
My current plan is to buy back shares during the NasDq bad news dip. Then, suck out some day trade pennies from Goldman Sachs.
Holding or day trading all depends on the risk you want to take during the 180 pre-rev-split days. Anything could happen after September 12…
On Aug 28 12:26 PM SIRI-Doom wrote:
> What know one else here will tell you.
>
> We all know to buy on the dips and SIRI has one on the way.
>
> SIRI has only 9 day to make it to 1.00 before the NasDq send out
> the noncompliance letter. When the news hits the negative media is
> going to be all over it. I can see SIRI trading 40 – 50 cents.<br/>
>
> We will need to wait and see what Mel does before we can predict
> how low the dip will go. If he delays and puts up a fight to get
> SIRI trading 1.00 than the dip will be shallow and recovery will
> be fast. However, his plan of Dec 18, 2008 is to go direct for the
> split.
>
> My current plan is to buy back shares during the NasDq bad news dip.
> Then, suck out some day trade pennies from Goldman Sachs.
>
> Holding or day trading all depends on the risk you want to take during
> the 180 pre-rev-split days. Anything could happen after September
> 12…
All I have seen for three days is high speed black box trading to fload 68 cents.
If I was not frearful of Sept 12 news hitting early, I would be doing the GS penny milk for 3 cent spreads.
On Aug 28 12:33 PM jmsithy wrote:
> well anyhow I say there will be one last pop to get this close to
> 1.00 if not .80 right before Sept 12th / I wont be scared to sell
> then if it goes to .80 right before that time if I see it start going
> back down around the 12th
On Aug 28 01:02 PM SIRI-Doom wrote:
> What news do you think will drive SIRI to 80 cents by 12 Sept?<br/>
>
> All I have seen for three days is high speed black box trading to
> fload 68 cents.
>
> If I was not frearful of Sept 12 news hitting early, I would be doing
> the GS penny milk for 3 cent spreads.
Good Lord- I can't wait till it does get Bullish in that case!!!
On Aug 28 03:02 PM bloomberg 30 wrote:
Currenr bear market is like nuclear warfare. There are no winners,
> only survivors.
So your questions are how high soon, and how low the dips. Good work.
With the necessary help from Goldman Sachs he should achieve his goals.
But that shouldn't stop it from generally rising.
On Aug 28 01:02 PM SIRI-Doom wrote:
> What news do you think will drive SIRI to 80 cents by 12 Sept?<br/>
>
> All I have seen for three days is high speed black box trading to
> fload 68 cents.
>
> If I was not frearful of Sept 12 news hitting early, I would be doing
> the GS penny milk for 3 cent spreads.
Thanks Jim 210-854-6800
question to answer of mine is on labor day there is no trade. does nasdaqw count this day as tradng day?? as part of 30 day clock? if not counted i count 30th day to be sept 14. is this true i wonder?
If SIRI doesn't reach $1 by September 14th, Sirius XM will then have a minimum of six months and a maximum of twelve months to correct the issue or ultimately face delisting from the NASDAQ. Mel confirmed during the 2nd quarter conference call that he will not complete a reverse split, until mandated by the NASDAQ rules. Sirius XM will not go to the OTC, if absolutely necessary it would complete a reverse split (six – twelve months, more realistically twelve months) to maintain NASDAQ compliance. The link to the call is: investor.sirius.com/ev...
Fill out the requested information and proceed. Fast forward to 65% through the call, where the 2nd analyst asks a couple question to Mel. In response to the second question, Mel confirms no reverse split until absolutely required by the NASDAQ to maintain compliance. After Monday September 14th, which is 30 trading days after August 3rd (as the markets are closed for Labor Day), Sirius XM’s minimum six to twelve month period to become compliant with the standards will begin.
NASDAQ has been rather inconsistent in implementing the rule and who’s to say they actually will, as they have extended the clause for the market participants multiple times. However, an extension will not be needed and the reverse split will not need to occur.
This stock may move 5 cents in a day; however, there will be no significant drop as others allude to. This stock (and its profitability potential) is dramatically undervalued and has been manipulated and further suppressed. Do I think Sirius XM is a $50 stock…. NO! I am very rational. Yet, I am extremely confident this stock will reach and exceed the $1 mark within the next three months.
Last, don’t be surprised if this equity encounters considerable resistance at $1. Just don’t sell as short activity will in fact have picked up, potentially creating a significant short squeeze at the $1 level. Ultimately, don’t miss your opportunity.
JPearce, waiting for a large dip will only hurt your position (or lack thereof) as this equity continues to increase. I rate this equity as Outperform with a current market price of .69 cents.
Most importantly, don't be fooled by the market makers, bashes and negative media tactics. Anyone reporting on Sirius XM (outside of Bloomberg and Reuters) has an agenda, including myself.
My agenda is to make an extreme profit. Follow my lead Jim.
The 30 day period begin August 1st; however, the first actual trading day was the August 3rd (as stated on the NASDAQ website). Therefore, September 14th would mark the end of the 30 trading day period.
Overall, it doesn't even matter. Long Sirius XM.
On Aug 28 09:03 PM 475686 wrote:
> for the the last post, there will be no reverse splt in sept. think
> about why did mel change the authorize deadline from dec 2009 to
> juine 2010??? that's an easy one. the stock will be back over a dolar
> but not for a while the way i see it. there will be delist, and stock
> will take a hit, but will respond with time. with clock given to
> be 180 days, the stock will not be delisted. can you count 180 days
> from september? that's a long time. no need to delist since by end
> of year, stock will make one dolar.
>
> question to answer of mine is on labor day there is no trade. does
> nasdaqw count this day as tradng day?? as part of 30 day clock? if
> not counted i count 30th day to be sept 14. is this true i wonder?
On Aug 28 09:36 PM senftiva wrote:
> JPearce here is the deal. I am long and have been for the last 4
> months. So yes I am bias. But here is the truth regardless of my
> influence:
>
> If SIRI doesn't reach $1 by September 14th, Sirius XM will then have
> a minimum of six months and a maximum of twelve months to correct
> the issue or ultimately face delisting from the NASDAQ. Mel confirmed
> during the 2nd quarter conference call that he will not complete
> a reverse split, until mandated by the NASDAQ rules. Sirius XM will
> not go to the OTC, if absolutely necessary it would complete a reverse
> split (six – twelve months, more realistically twelve months) to
> maintain NASDAQ compliance. The link to the call is: investor.sirius.com/ev...
>
>
> Fill out the requested information and proceed. Fast forward to 65%
> through the call, where the 2nd analyst asks a couple question to
> Mel. In response to the second question, Mel confirms no reverse
> split until absolutely required by the NASDAQ to maintain compliance.
> After Monday September 14th, which is 30 trading days after August
> 3rd (as the markets are closed for Labor Day), Sirius XM’s minimum
> six to twelve month period to become compliant with the standards
> will begin.
>
> NASDAQ has been rather inconsistent in implementing the rule and
> who’s to say they actually will, as they have extended the clause
> for the market participants multiple times. However, an extension
> will not be needed and the reverse split will not need to occur.
>
>
> This stock may move 5 cents in a day; however, there will be no significant
> drop as others allude to. This stock (and its profitability potential)
> is dramatically undervalued and has been manipulated and further
> suppressed. Do I think Sirius XM is a $50 stock…. NO! I am very rational.
> Yet, I am extremely confident this stock will reach and exceed the
> $1 mark within the next three months.
>
> Last, don’t be surprised if this equity encounters considerable resistance
> at $1. Just don’t sell as short activity will in fact have picked
> up, potentially creating a significant short squeeze at the $1 level.
> Ultimately, don’t miss your opportunity.
>
> JPearce, waiting for a large dip will only hurt your position (or
> lack thereof) as this equity continues to increase. I rate this equity
> as Outperform with a current market price of .69 cents.
>
> Most importantly, don't be fooled by the market makers, bashes and
> negative media tactics. Anyone reporting on Sirius XM (outside of
> Bloomberg and Reuters) has an agenda, including myself.
>
> My agenda is to make an extreme profit. Follow my lead Jim.
On Aug 29 02:00 AM JPearce wrote:
> Thanks for the Info! Much appreciated!
And there is one more thing: Reverse split? More garbage talk. After the merger, it was talked about as a problem solving measure, but today, a lot has changed. Share price is up, Siri is weathering this economic storm while other company's are failing, And for cash flow versus cost of doing business, the numbers are improving. At this point, reverse split is all conjecture with no concrete facts other than opinion.
Scot's Slant