What we know: Archegos went under in 2021 because of their GME short position. That basket of swaps was passed on to Credit Suisse, who then collapsed in 2023, and has since been absorbed by Swiss banking behemoth UBS. So now UBS is in the hot seat. They're a "too big to fail" and the Swiss gov is sweating bullets.
We also know: Someone with deep pockets has been spending tens of millions of dollars the past few days, buying GME $20 call options with a June 21 expiration. There are 485k call option contracts (48.5 million shares) with expiration dates ranging from May 31 to July 19.
What we also know: GME executed an ATM 45 million share offering Friday. We don't know if those shares were sold on the open market, or sold in a private deal, to an undisclosed buyer.
Here's the speculative part, so grain of salt, etc: Supposedly, a UBS trader claims that UBS is the buyer for "more than 2/3" of those 485k contracts, and they're going to exercise them, to buy their way out of the Archegos>Credit Suisse>UBS black hole. He states that buying that many shares would put UBS above the SEC's insider limit of 10% ownership, so that's why GME issued the 45m share offering today, in a friendly deal, to increase the float just enough so that UBS can skirt under the 10% rule.
If this speculation is true, then what? Hard to say, but consider that UBS is just one of many big money players holding a GME toxic short position, and the MOASS thesis has always been that whoever acts quickly and gets out first (buys enough shares to close their short position) can survive. It will cost them greatly, but they can survive, while most of the rest are then screwed. Imagine Musical Chairs, but UBS wipes out most of the chairs in one fell swoop, in the first go around, and all the other players are left without a seat.
What that scenario could mean for shareholders: The large buys by UBS would raise the share price, which would then put the current (huge) option chain ITM (in the money) which would trigger a cascading series of higher price jumps (like going up stair steps) as each higher strike price then becomes ITM. And all this is very conveniently timed, because CAT (Consolidated Audit Trail) oversight goes into effect on May 31.
There's no way to know yet if this UBS rumor is legit, but from what's been happening the over the past few days it does seem very plausible, and if it's legit then we will know soon.
This stuff gets confusing for the layman (myself included.)
https://www.investopedia.com/terms/c/calloption.asp
A call option gives the buyer (owner) the right to buy the stock at the strike price.
The person who creates the call option and sells it is gambling that the stock price will not go up past the price.
If the price stays low when the option expires, then they make a bunch of free money.
If the price goes up, then they owe the difference between the strike price and the stock price if the buyer exercises the option. Suppose the stock price goes up to $21 and the strike price is $20. In this case, the seller needs to come up with $1 per option sold. But suppose it goes up to $30. In this case, the seller needs TEN TIMES as much money to cover the options. You can see where this is going -- every small increase over the strike price MULTIPLIES the amount of money the seller of the call option needs to cover it, and potentially, the price of the stock can go infinitely high!
However, for owners of the stock who believe the price will not go up, selling call options is a good way to generate money. If the price goes up past the strike price, you lose the shares of stock and thus the profits that would've been made if you simply held the stocks. But if it does not, you make money on the side.
If you are confident that the price will go up past the strike price before they expire, then you should buy them. At worst, you lose all the money you used to buy the options because it doesn't go up. At best, you make tons and tons of money.
FURTHERMORE -- THIS IS IMPORTANT: If you own a call option, you can exercise the option even if the price is LOWER than the strike price. You pay a premium for the right to buy a share of the stock versus just buying it on the market. NORMALLY, NO ONE WOULD EVER DO THIS BECAUSE IT IS STUPID. But for impossible to buy stocks like GME, this means that the buyers of the call options may just be super desperate to get a hold of shares of the stock, and are going to exercise those shares whether or not the price goes up past the strike price. Remember, the seller of the call option is promising that they are able to come up with shares of the company at the strike price when the option expires!
So possibly, what is happening is GME is selling call options, desperate investment banks are buying them up, and GME is going to be paid a premium price for shares of the company, ABOVE MARKET RATE, because that is the TRUE value of the stock. If GME were to issue call options at $50, $100, and $1,000 and people still bought them up and exercised them regardless of the price of the stock, then this is a way to bypass the market shenanigans and get a fair price for the stock. Unfortunately, it means those of us who are HODLING will get screwed, since the investment banks will get their stocks regardless of whether we sell or not. Once the banks get their stocks, then there will no longer be any pressure to push the stock price up, and whoever is HODLING will get screwed if the true value of the stock goes down.
Why would the investment banks buy call options above market rate when they can still buy genuine GME shares for 22 dollars each. Is it because they can't buy enough GME shares quickly enough?
IMO It is a planned operation. If the OPs theory is correct, USB will figure out a way to push GME stock higher, thus moving their options into the money. They can than sell those options to pay close out their naked shorts. It appears that this theory, which sounds plausible, can only be used for a limited amount of naked short covering. My thought is that USB, saving there butts, will drive GME stock skyward. USB will be ought of the naked short business for GME, and maybe a few others, but the rest will go the way of Archegos.
Thanks fren!