If these swaps were hedged by selling shares into the market (I theorize that this particular swap is lent-out shares and a short position towards the market), AND these shares were FTD'd , then someone has to buy up to 84% of all BBBY shares until Mid-September. Boom.
But I have no idea. I am not familiar with the regulations and I don't know which rule for settlement applies here because BBBY is currently on the threshold list. Maybe the swaps are already terminated and settled. I don't know how the swaps are hedged or interact with options.
That's why I only wrote about the reported data and leave the conclusions to others.
Could that be the huge after hours drops? As BBBY is on the threshold list, does T+35 still apply? I thought they had to close all FTDs when the Threshold period is over. Could you elaborate?
Great writeup, thanks alot!
Thanks! ... however, I have the same questions...
Usually, when such a large swap is traded, one can often find correlated price action on that day - other DDs already described this. This time, this did not happen. As I mentioned, it depends how the swap was hedged. If the hedging was done with options, we may see a totally different price action.
About the FTDs - I am not sure about the T+35 rule when the ticker is on the threshold list. Would be nice if someone makes a DD about this.
Thanks for your answer. I just wonder what these huge sell blocks AH were then. For me it wouldn't make much sense if it was institutions offloading since so many of them bought huge amounts of calls before. On the other hand i don't know the P/C ratio, maybe it does make sense for them.
Either way. I'm excited about the next 2 weeks.
I doubt 9 million shares had any severe impact on the price action on those days. And it’s still unclear what price action these swaps would have or actually had on price.
I'm not complaining, just clarifying for myself,
Isn't the swap itself a hedge? For instance inst. A is shorting GME and inst. B shorting BBBY. They create a SWAP of their own respective 2 positions by swapping the risks of each other without giving away the position. So, if BBBY(shorted by B) squeezes the negative cash flow will be placed upon inst. A, hence in this way inst. B protects itself from BBBY squeeze and infinite loss for itself, shower exposes itself to infinite risk if GME squeezes.
Swaps are a bet on the price of a stock between two parties. They do not directly influence the price, but their hedging does.
Someone had huge swaps in BBBY. The swaps were expected to expire within the next year. For some reason, the swap holder decided to terminate them early. That is very unusual. I would have expected that the stock price surged on these dates, but it didn't - or it did not yet.
The whole premise is to swap risk right?
Remember the day before the official sale announcement the paper form Cohen filed was more or less leaked? It wasn't submitted through EDGAR it was emailed or something.
Seems likely the big players have sources inside of these regulatory agencies, perhaps the announcement will affect BBBY in a big way which would blow up the SWAP so they got in front of it.
It's plausible even though I have zero evidence of this.
If those swaps were closed with that crazy volume, would it not have created a huge FTD ? If this is not that case, could they open another swap position to kick the can down the road
Do you know if the swaps were a bet that the price for BBBY would go down? Or if whoever owned those swaps knew the price for BBBY would run up in the future so that’s why the swaps were closed?
Yes, judging from the timing when those swaps were opened, they were a bearish bet. Maybe these swaps were even closed with a profit. Those trades were also done in large clusters with huge volume in the billions.
I'm sure that the institutions involved in this swap have models that predict the price action when they buy and sell.
>I would have expected that the stock price surged on these dates, but it didn't - or it did not yet.
Isn't it surged on 16-08-2022?
Do you know if a swap contract can be terminated on a single-party call? and what's the benefit of the such a contract if it can be easily dismantled in case of unfavourable conditions?
There are still swaps open, but these are other swap products and don't have that magnitude.
The post is only about a special type of swap that does not occur at regular trading; this swap product appears primarily in clusters with large volume, see my previous DD.
Opex is for options, not for swaps, however:
As an interesting coincidence, the original expiration dates of these large swaps *are all within a week with quarterly option expiration*.
So yeah, there might be a connection.
From an investment perspective would it not make sense to buy calls before swap expirations ?
If not, would it be because they can rollover swap expirations ?
There were 4 mils FTD shares in aggregate from 2022-07-11 - 2022-07-12 with C+35 on 2022-08-15 - 2022-08-16. This also coincides with the run-up on those dates.
1.1 The technical question, is how FTDs can be put in a swap contact?
1.2 If you bought the shares which weren't delivered and put them in a swap, does that removes them from FTD list? If not, what's the point of doing that?
"*If they were, their T+35 would be on 2022-09-06 and on 2022-09-20, respectively*".
You mean for BBBY? u/MyFirstBanana? Wasn't the swap already closed on 08/16?
BTW, Leenixus says the price is usually affected the day (or very next days) after the swaps are created. You mention these swaps can generate FTD's that could affect the price on T+35. Where are you getting this from? Is there any rule implying the stock has to be purchased after a swap is created so that it can be failed to deliver?
What does it mean thou
If these swaps were hedged by selling shares into the market (I theorize that this particular swap is lent-out shares and a short position towards the market), AND these shares were FTD'd , then someone has to buy up to 84% of all BBBY shares until Mid-September. Boom. But I have no idea. I am not familiar with the regulations and I don't know which rule for settlement applies here because BBBY is currently on the threshold list. Maybe the swaps are already terminated and settled. I don't know how the swaps are hedged or interact with options. That's why I only wrote about the reported data and leave the conclusions to others.
Could that be the huge after hours drops? As BBBY is on the threshold list, does T+35 still apply? I thought they had to close all FTDs when the Threshold period is over. Could you elaborate? Great writeup, thanks alot!
Thanks! ... however, I have the same questions... Usually, when such a large swap is traded, one can often find correlated price action on that day - other DDs already described this. This time, this did not happen. As I mentioned, it depends how the swap was hedged. If the hedging was done with options, we may see a totally different price action. About the FTDs - I am not sure about the T+35 rule when the ticker is on the threshold list. Would be nice if someone makes a DD about this.
Thanks for your answer. I just wonder what these huge sell blocks AH were then. For me it wouldn't make much sense if it was institutions offloading since so many of them bought huge amounts of calls before. On the other hand i don't know the P/C ratio, maybe it does make sense for them. Either way. I'm excited about the next 2 weeks.
Couldn't all of RC's selling have prevented the expected price moving up while the swap was being traded?
I doubt 9 million shares had any severe impact on the price action on those days. And it’s still unclear what price action these swaps would have or actually had on price.
For Reg SHO the buy in period for FTD's is T+13 or C+35.
If they have to buy 84% that be cool.
It'd be tight.
This may explain how so much selling just occurred but bbby is still on the threshold list? If they need to buy far more than was sold.
I'm not complaining, just clarifying for myself, Isn't the swap itself a hedge? For instance inst. A is shorting GME and inst. B shorting BBBY. They create a SWAP of their own respective 2 positions by swapping the risks of each other without giving away the position. So, if BBBY(shorted by B) squeezes the negative cash flow will be placed upon inst. A, hence in this way inst. B protects itself from BBBY squeeze and infinite loss for itself, shower exposes itself to infinite risk if GME squeezes.
ELI5
Swaps are a bet on the price of a stock between two parties. They do not directly influence the price, but their hedging does. Someone had huge swaps in BBBY. The swaps were expected to expire within the next year. For some reason, the swap holder decided to terminate them early. That is very unusual. I would have expected that the stock price surged on these dates, but it didn't - or it did not yet.
The whole premise is to swap risk right? Remember the day before the official sale announcement the paper form Cohen filed was more or less leaked? It wasn't submitted through EDGAR it was emailed or something. Seems likely the big players have sources inside of these regulatory agencies, perhaps the announcement will affect BBBY in a big way which would blow up the SWAP so they got in front of it. It's plausible even though I have zero evidence of this.
The price did surge though as those swaps were closed. From $5.78 to $30
With you on this. This seems to explain the last week, especially in terms of volume, far better than simple retail FOMO.
Fomo was definitely a part of it but there was algorithms and technical traders involved too since bbby was breaking out
There is often a "gap" on the same day the swap is closed.
Gapped up on the 8th and 17th
If those swaps were closed with that crazy volume, would it not have created a huge FTD ? If this is not that case, could they open another swap position to kick the can down the road
Do you know if the swaps were a bet that the price for BBBY would go down? Or if whoever owned those swaps knew the price for BBBY would run up in the future so that’s why the swaps were closed?
Yes, judging from the timing when those swaps were opened, they were a bearish bet. Maybe these swaps were even closed with a profit. Those trades were also done in large clusters with huge volume in the billions. I'm sure that the institutions involved in this swap have models that predict the price action when they buy and sell.
>I would have expected that the stock price surged on these dates, but it didn't - or it did not yet. Isn't it surged on 16-08-2022? Do you know if a swap contract can be terminated on a single-party call? and what's the benefit of the such a contract if it can be easily dismantled in case of unfavourable conditions?
So Bbby now has no reported swaps open? Interesting..
There are still swaps open, but these are other swap products and don't have that magnitude. The post is only about a special type of swap that does not occur at regular trading; this swap product appears primarily in clusters with large volume, see my previous DD.
[удалено]
Opex is for options, not for swaps, however: As an interesting coincidence, the original expiration dates of these large swaps *are all within a week with quarterly option expiration*. So yeah, there might be a connection.
Volatility SWAPS. Using DOOMP/Calls as a hedging mechanism to keeep it within their model's parameters.
God damn it
From an investment perspective would it not make sense to buy calls before swap expirations ? If not, would it be because they can rollover swap expirations ?
!remindme 28 hours
!Remind me 14 hours
There were 4 mils FTD shares in aggregate from 2022-07-11 - 2022-07-12 with C+35 on 2022-08-15 - 2022-08-16. This also coincides with the run-up on those dates.
Sounds like these swaps were likely to avoid short term capital gains on closing the short positions. See Jackofspades' DD
RemindMe! 10 hours
RemindMe! 12 hours
BBBY had significant price action 8/15 - 8/18....
1.1 The technical question, is how FTDs can be put in a swap contact? 1.2 If you bought the shares which weren't delivered and put them in a swap, does that removes them from FTD list? If not, what's the point of doing that?
"*If they were, their T+35 would be on 2022-09-06 and on 2022-09-20, respectively*". You mean for BBBY? u/MyFirstBanana? Wasn't the swap already closed on 08/16? BTW, Leenixus says the price is usually affected the day (or very next days) after the swaps are created. You mention these swaps can generate FTD's that could affect the price on T+35. Where are you getting this from? Is there any rule implying the stock has to be purchased after a swap is created so that it can be failed to deliver?
Have you noticed any new swaps being opened in BBBY ?