$IRNT option pricing is completely fucked – PROOF that market makers are really being squeezed
So I was skeptical about whether the option expirations would actually produce a real squeeze. I was worried, how is that possible that market makers would paint themselves into a corner like that? Surely we missed something? I was skeptical about whether the squeeze had any merit besides retard-strength.
I was skeptical, until I saw the option prices of October. There was something alarmingly unusual about it.
Do you know what put/call parity is? It is the theory that at the stock’s trading price, the put and call options at the strike price of the stock’s trading price should be the same price. Why must they be at the same price? Well, because if they weren’t, you could make an arbitrage. For example, if the calls were more expensive than puts at the same strike price, then you could sell a call, buy a put, pocket the difference, then just buy 100 stock and no matter how the stock moves, you have just pocketed the difference.
Check any stock, spy, anything, literally anything. The call/put options with strike prices near the money have the same price.
And then look at $IRNT October.
The options are completely F***D. The puts are ~$15 at the money, while the calls are ~$7. Look at any other stock, at any other strike price. Do any of them do that? No! They are all roughly the same.
What does this mean?
It just means there is a lot of stress in this market. It means that all usual finance rules about how markets work are thrown out the window.
It takes an ungodly amount of stress in the market to make put-call parity rule disobeyed. There is literally free money right there in the option chain that even market makers can’t just take.
It also means that the market thinks the price of the stock will drop dramatically before october (why else would puts be more expensive?). Normally, if the market thinks that, then it just gets priced in and the stock goes down *now*. But this time, it can’t get priced in. The market, including MMs, is literally saying that "even though we know the price will be lower, we think it’s best to go long on the stock as of now". The market is literally telling you that a squeeze is incoming. The losers in this scenario are any option writers and shorters forced to buy stock during the squeeze.
Put Call parity is violated in $IRNT Oct options, which is a sign of market makers breaking and that the market thinks there will be a squeeze.
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September 15, 2021 at 02:28PM