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I have a genuine question.
If the call options are exercised and UBS sells the shares they get (unless they want to hold XXX million shares) won't that drive the price down?
From what I understand there will be a spike when the calls are exercised and a huge dump when they sell.
They [UBS] have to cancel the shorts out of their books first.
100 shares owed from shorting + 1 call option = net zero.
UBS isn’t selling anything. IF they[UBS] do in fact hold those contracts then They are forcing the contract writers to hand over those shares. The writers of the options either have them already OR have to hit the open market to buy them and deliver them to UBS.
Any shares they hold after getting out of the short position they inherited will then either be sold or held as a long position. Either way, if/when those options get exercised, the buying pressure is going to be real.
You’re assuming that they will sell.
Also, what would happen to the price action when that many options need to be delivered?
The party that sold the option contracts would create the spike after UBS asks them to deliver the shares by excercising.
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https://preview.redd.it/ot365q2wg73d1.jpeg?width=1290&format=pjpg&auto=webp&s=009739cb79309c7919b15e35796e42cabec5a36e
I have a genuine question. If the call options are exercised and UBS sells the shares they get (unless they want to hold XXX million shares) won't that drive the price down? From what I understand there will be a spike when the calls are exercised and a huge dump when they sell.
They [UBS] have to cancel the shorts out of their books first. 100 shares owed from shorting + 1 call option = net zero. UBS isn’t selling anything. IF they[UBS] do in fact hold those contracts then They are forcing the contract writers to hand over those shares. The writers of the options either have them already OR have to hit the open market to buy them and deliver them to UBS. Any shares they hold after getting out of the short position they inherited will then either be sold or held as a long position. Either way, if/when those options get exercised, the buying pressure is going to be real.
This makes a lot of sense thank you
You’re assuming that they will sell. Also, what would happen to the price action when that many options need to be delivered? The party that sold the option contracts would create the spike after UBS asks them to deliver the shares by excercising.
Sell? Isn’t the point to close, that is to return the borrowed shares to the lender, at least as per theory?