Kobalt (81.56)

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September 21, 2011 – Comments (1) | RELATED TICKERS: OMEX , VIXY

So, Odyssey Marine tanked by 30% today on good news. Huh??!?! Well, you see, it is a little complicated.

To recap, Odyssey Marine is a company salvaging sunken treasure. Talk about speculative, right? First you have to find it. Then you need to establish whose it is, and if you are allowed to salvage it. Then you need to get it off the ocean floor. Then you need to fight off legal challenges, even if you think you had them beat. Finally, you need to market it for the best price.

Add to that two more threats; first, the fact that you are a small capitalization company, whose thinly traded stock is easy to move with just a rounding error of an institutional investor. Then, add leverage to that by allowing (relatively) large options contracts to be bought and sold on that thinly traded stock.

So, when a good piece of news or two are announced like these two recent pieces http://bit.ly/oFJUU7 and http://bit.ly/pVrSDN, the stock can react very enthusiastically. On that enthusiasm, somone then enters into a large and what they think is a safe options contract like the one in this piece http://bit.ly/pR1xtK. Finally, traders, looking for an crazy trade, go gunning for the strike price, knowing that they can probably take it in a small cap jobber.

And take it out they did. Probably an excellent lottery ticket buy at this point. I might even go long and put a green check next to it.

1 Comments – Post Your Own

#1) On September 21, 2011 at 4:10 PM, Kobalt (81.56) wrote:

Well, some bona fide "bad" news doesn't hurt to make a stock tank, either. See latest Black Swan ruling here http://bloom.bg/qrJz6q.

I will say, reading the previous coverage of the rulings, it was pretty clear from the articles that the court was going to rule this way. Odyssey won't get relief, if it gets any, until it gets to higher courts.

Of course, it seems like Odyssey has a nice juicy legal case against the United States government as a backup to actually getting awarded the Black Swan treasure. For more on that, see the coverage of the Odyssey Wikileaks scandal. Any lawyers have thoughts on that?

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