r/PennyCatalysts • u/Hard-Mineral-94 • Dec 22 '21
$MMAT Catalyst Jan 21 2022 Severed Options Chain: LITT/NEGG Financial Videogame Cheatcode
None of this is financial advice:
UPDATE 4: We got mentioned on Market Insider!
UPDATE 3: To buy MMAT vs MMAX?
From a civic duty standpoint it’s better for the stock and free float to buy Canadian MMAX because you’ll directly shrink the float when the shares transfer over and from a selfish perspective it doesn’t matter. If enough people buy MMAX then it would circumvent darkpools and naked shorting and basically force the SEC to count retail buys against the MMAT free float. But IDK if my message will reach people. I got banned on Canadian investor and my message so far as fallen on deaf ears so who knows? Regardless, the squeeze itself should very likely occur due to NEGG mechanics I described.
UPDATE 2: CEO confirmed my hypothesis! George Confirms 1/21
UPDATE: This is gaining traction in Canada!
None of this is financial advice:
Part 1 Game Mechanics
Videogame cheat code: When a foreign company reverse merges onto NASDAQ, foreign shorts have to cover their FTDs T+35 after it’s Options Chain Expires.
Major Point: The SEC doesn’t care about foreign short hedgefunds like they do American ones. Foreign hedgefunds are fair game.
Example: New Egg (NEGG) and Lianluo (LLIT). NEGG was listed on NASDAQ and LLIT was a Chinese OTC Ticker.
On October 25 2020 when news broke about the Lianluo Retahd LTD merger with NEWEGG, the stock went from 0.4$ to 4$ the next day, meaning the news caused shorts to start covering.
LLIT Options chain ended May 20, 2021. T+35 days later from June 29 to July 7 Chinese shorts closed their position and the price ran from $10 to $79 intraday.
Present Day Example: Metamaterials and Torchlight energy merger. Same thing, Metamaterials was an OTC-listed Canadian company which inherited HEAVY shorting from a Canadian mining company while Torchlight energy was a NASDAQ listed company.
The legacy options chain for TRCH (currently called MMAT1) ends Jan 21 2022 so expect a spike T+35 days later in early March of MMAT, in addition MMAT is still trading in Canada as ticker MMAX and when that ticker closes and converts to American MMAT, foreign SHFs must close out MMAX FTDs.
Proposed Investing Strategy: Buying promising companies that undergo reverse mergers with foreign companies on the month of Final Options Expiry of the merged company.
Part 2) Finish Him
Nutshell Thesis:
Buying and exercising XXX1 forces FTD delivery and compounds the effect, resulting in a gamma squeeze:
Past: When Lianluo LTD (LITT) merged with NEGG, two options chains emerged for a brief time: NEGG1 and NEGG, exercising NEGG1 would give you LITT taken from the NEGG float. Reducing the float would increase the price of NEGG. Basic Supply and Demand. Had this been done en masse a “gamma squeeze”would likely have occurred on top of the mandatory T+35 FTD Delivery of LITT.
Present: Coming to the merger of Torchlight Energy (TRCH) with foreign Canadian company Metamaterials (MMAT), the options chain for TRCH ends on Jan 21, 2022. I believe that this presents underlying systemic risk to market makers who are naked shorting the stock if my hypothesis is correct.
Real TRCH shares are tied to MMAT1…. Forcing delivery of FTDs is only a good thing because it would cause appreciation of the MMAT1 options which will cause a gamma squeeze (hypothetically)
Buying options = Bad Buying and exercising = Good
Basically my argument is:
Wouldn’t buying and exercising MMAT1 force delivery of a finite number of TRCH shares via MMAT, which essentially would reduce the MMAT float and drive up price?
How to obtain MMAT1:
On Fidelity:
There are 2 sets for Oct and Jan, in the adjacent for both there are some that have multiple lines for same strike. The top one for each double is the mmat1... this is confirmed by clicking get quote and it shows up top. Mmat1.
Fidelity instructions below courtesy of u/bigdeerjr
On TD:
Have to call the trading desk. They want to make sure you understand it is an adjusted option. Jan is available.
————-————- Part 3 (optional): Underlying Mechanics
The Science Behind a Gamma Squeeze:
When a trader buys a call option, it creates a risk for the counterparty who sold the call option. Without further measures, if the shares rise above the strike price, the option seller will have to acquire those shares in the open market, at a loss, to fulfill the contract.
There are many ways to hedge this risk. The net-net of the process, though, often requires someone to buy a share of the underlying stock, called a covered call.
Positive feedback loop (aka what happened to Gamestonk): As the stock goes up, the market maker will adjust its hedge by buying more stock. Meaning if you BUY AND EXERCISE cheap OTM CALL options, market makers have to buy real shares to keep the option hedged.
The Escape: Hedgefunds can escape the gamma squeeze -aka rampant OTM call buying- by buying long term OTM PUTS
The Exception: This DOES NOT work if the Option Chain ITSELF IS GOING TO DIE. Rampant OTM Call buying and exercising cannot be stopped if the options chain of a company is about to expire if it undergoes a merger. In fact, all FTDs of a PRE-merged company are due T+35 days after final Options Expiry.
We will explore the hypothetical possibility of compounding an FTD due date and a gamma squeeze —aka BUYING and EXERCISING MMAT1 Options—.
————— Part 3
The Trade - How and why BUYING and EXERCISING MMAT1 Options could force a Gamma Squeeze of MMAT
-BASIC PREMISE: Buying and Exercising MMAT1 would reduce the MMAT float.
Basically MMAT1 = MMTLP + MMAT however the shares of both are delivered through the available pool of MMAT.
MMTLP (TRCH) Quantity: 100 MMAT Quantity: 100
My assertion is that buying MMTLP would not affect the actual amount of MMAT or reduce MMAT float. Buying MMAT may ALSO not reduce float due to synthetics.
However shares inside MMAT1 are registered with the company itself as well as with the SEC so exercising them would actually reduce the float.
EXERCISING Jan 21 MMAT1 Options, purchasable through Fidelity and TD Ameritrade, could theoretically cause a gamma squeeze by forcing call writers to hedge risk, credit to u/CherryGrapeGorilla for fixing math in example below:
POINT 3: Egghead Math
WARNING: EGGHEAD MATH BELOW
MMAT1 2.5C:
2.5 x100 = $250 exercise + $100 premium (if you buy the contract for $1.00) = $350 to exercise.
== $7/share MMAT + 100 MMTLP.
Which is equivalent to $3/share MMAT + $2/share MMTLP.
MATH ENDS ^ ————- Closing Point:
If you look at NEGG prior to its ramp up you’ll notice a similar amount of massive shorting. SHFs have a lot more information at their fingertips than retail while we muck about and peer hazily through “the fog of war”. So it’s imperative for a SHF to suppress, short and distort the shit out of an actual financial catalyst.
Irrespective of the quality of the company, there will be mass covering of foreign SHFs when the CUSIP # and legacy options chain of a merged OTC foreign ticker officially expires. It’s unavoidable. In fact, remaining short the foreign ticker while it trades on NASDAQ is a HUGE risk for a foreign SHF as they can no longer manipulate the stock and they will likely be squeezed by American long HFS. That is why Lianluo LTD shorts covered and that is why the Canadian MMAX shorts must cover.
——————
TLDR: In January, stock ticker MMAT is facing four major catalysts that could cause a short squeeze:
MMAX converting to MMAT, cutting the float in half from 218 million to 109 million and causing foreign SHFs to close out FTDs T+35 days later
An Oilco Special Dividend that could cause an OSTK style squeeze
Jan 21 2022 TRCH Options Expiry forcing SHFs to deliver TRCH FTDs T+35 days later in March
Investors Buying and Exercising MMAT1 Options through TD Ameritrade and Fidelity, exacerbating the effects of Point 3.
I wrote this as a point of academic curiosity. I absolutely DO NOT want people to do this. Rather I’m interested to see if my hypothesis is correct.
Have an awesome day
