POET Gamma Map: The Run to $5.74 and the $5.50 Pin Fight

A month ago we called $5.74 a chart level, not an options level. Wednesday at midday POET Technologies POET Technologies (POET) was trading at $5.74. Up 13% on the day, 4.1M shares by lunch, no company news on the wire, the bond market closed for Veterans Day & two and a half sessions left before the Q3 print lands Monday at 7:00 a.m. in a press release with no call. The stock ran straight through the one strike that mattered on the pre-print board, and the map we drew Monday flipped. Here's the new one.

The Yo-Yo road to today

Monday closed $5.26. Tuesday was CPI day and POET did what it does on macro days: it traded with the basket, printed $4.92 at the low and closed $5.07, down 3.6%. Then the bid showed up overnight. The stock was $5.40 in the pre-market, the morning after Lightwave Logic's report, and it didn't stop. Nothing from the company. Just a tape that decided, three sessions early, that it wanted to be above $5.50.

That matters because $5.50 is where the pre-print options board kept its only real position: 5,345 Nov 13 calls, expiring Friday afternoon, one session before the number. On Monday those were 30 cents out of the money. At midday Wednesday they're 24 cents in. You can likely guess where we're going with this.

Where the bets are being laid

Open interest settles overnight, so Tuesday's close tells you what Monday and Tuesday opened, and Wednesday's volume tells you what's being bought right now. Read together, the bets are stacked in four places.

The pre-print upside, Nov 13. The $6 calls went from 558 contracts Monday to 1,771 by Tuesday's close, and another 1,020 traded Wednesday by midday. The $5.50 line added 160 to 5,345 and traded 1,110 today. Somebody bought upside that dies before the print, and with the stock at $5.74 they're already being paid. The puts on that board grew too, $4.50 to 1,530 and $5 to 869, but those expire Friday; they're hedges on the run, not on the number.

The post-print upside, Nov 20. The stack reshuffled. $5 calls went from 1,227 to 2,110. $6 calls came down 407 to 3,873 while $6.50, $7.50 and $8 all grew, and a $9 line with 5,598 calls showed up in the read. Wednesday's volume runs straight up that chain: 831 at $6, 622 at $6.50, 303 at $7, 146 at $7.50, 175 at $9. That's the bet on the print itself, and it's being laid between $6 and $9.

January. The $12 calls, 69,535 of them, added 129 since Monday and traded 185 more today; the long money is still building that one at 2.1 times the stock. The new line is $6: 1,020 January $6 calls traded Wednesday against 2,903 open, a third of the line in half a session. Thursday's open interest tells us whether that was buying or cashing.

The one put bet. Nov 20 $4 puts, 3,981 open, flat since Monday, 250 traded Wednesday. First real volume on that line all month. Everything else on the put side is small or already in the money from when the stock was higher. Wednesday's flow across all three boards by midday: 7,510 calls to 718 puts. Ten to one. Monday was 494 to 31.

What the run did to the dealers

Same convention as every map in this series: customers own the options, dealers are short them, round 100% implied vol. Dealers short calls hedge with long stock; dealers short puts hedge with short stock. Both make them buyers on the way up and sellers on the way down.

From Tuesday's $5.07 close to $5.74 at midday, the three boards pulled about 3.0M shares of dealer buying: 416K off the Nov 13 book, 575K off Nov 20, 2.0M off January, the January piece spread over the sessions that follow. Against 4.1M shares traded by midday, that's a real piece of the tape. The Nov 20 board flipped in the process. On Monday dealers were net short about 377K shares against it, because the in-the-money put stack was the biggest thing on the board. At $5.74 that stack is down to the $6, $7 and $8 lines, and the $5 and $5.50 calls went in the money on the other side. Dealers are net long about 215K against the event board now. They covered on the way up. That covering was Monday's upside fuel, and it's been burned.

So the ladder re-priced from $5.74 is the mirror of Monday's. If the release gaps POET to $6 Monday morning, dealers short the Nov 20 board buy only about 175K shares, because the stock already did most of that work this week. The real chase starts at $6.50 and $7: about 1.1M shares of Nov 20 buying at $7, with 3.7M more from January over the sessions after, when the $7 and $8 blocks and the January $7 line all go live. Down is now the heavier side. A gap to $5 forces about 705K of dealer selling at the open; $4 about 1.3M, into a $4.50 that still has only 175 puts. The stock pulled its upside fuel forward and left the downside fuel where it was.

What dealers need to do to kill premium, & how they usually do it

Here's the part of these maps we'll say every time, because it's the part retail never gets told. The dealers who are short the Nov 13 $5.50 calls want those calls to expire worthless. At $5.74 the line is worth about 36 cents a contract, roughly 24 cents of it intrinsic and 12 cents time value, about $195,000 across 5,345 contracts. A Friday close at $5.50 or below kills all of it. A close at $5.74 kills only the time value. A close at $6 hands the buyers roughly $70,000 more. The $6 calls are worth about 13 cents and die at anything under $6. The $5.50 and $5 puts die at anything above those strikes. Add it up and the close where the most open premium goes to zero is $5.50, which is why max pain on that board sits between $5 and $5.50.

How they get there isn't a conspiracy. It's hedging math with a clock on it. Three things typically happen at the end of the day Wednesday and Thursday before a weekly expiry like this one.

First, the lean. Dealers short those in-the-money calls hold about 366K shares against them. Every session that passes, the calls' deltas bleed, so the hedge shrinks, and the shrinking shows up as selling into the last hour when volume thins. That's the late-day drift back toward the strike you see on expiry weeks, and it's self-reinforcing: selling the hedge pushes the stock toward $5.50, which lowers the delta again, which frees more hedge to sell.

Second, the vol mark-down. The Nov 13 options don't contain the print; it lands Monday, after they're dead. So there's no event premium to defend, and the weekly's implied vol gets marked lower each morning. The calls get cheaper on a flat tape. Call holders watching the premium bleed sell, and when they sell, dealers buy back their short and dump the hedge that went with it.

Third, the offer at the strike. Friday morning, size sits on the offer at and just above $5.50 so the stock has a ceiling into the close. Friday is also PPI morning, 8:30 a.m., which gives the whole complex a macro tape to lean on.

None of that is guaranteed to work. It didn't work Wednesday. When the buyers keep coming, 1,110 contracts at $5.50 and 1,020 at $6 in half a session, dealers don't get to lean; they get run over and have to buy more stock, which is how a pin breaks and a run extends. The fight is the stock against the clock, and the clock is on the dealers' side until 4:00 p.m. Friday.

Friday's close is the whole question

Above $5.50 at Friday's close, the 5,345 calls get exercised and 534,500 shares get delivered to whoever owns them. Dealers already hold about 366K of it and buy the rest into the close. Those call holders walk into Monday's print long stock, unless they sell the calls first, which is what some of Wednesday's volume may already be. Either way the pre-print board clears and Nov 20 is the only structure left when the number hits.

Below $5.50 at Friday's close, the pin wins. A $5.40 close instead of $5.60 takes the dealer hedge against that line from about 386K shares to about 153K, roughly 233K shares of selling pressed into Friday afternoon. The next structure down is the Nov 13 $5 puts (869) and $4.50 puts (1,530), and it's small.

Then Monday. Then Nvidia Tuesday night after the close, inside the Nov 20 window, which carries both prints. We'll map the Nov 20 board again after the number.

What we're watching & monitoring into Friday

We're watching Thursday's open interest on the Nov 13 $5.50 calls. If it rises, the pin weight grows and Friday's close gets pulled harder toward $5.50; if it falls, the buyers took the money and the pin loosens. We're watching Thursday's open interest on the Nov 20 $6 and $6.50 calls. If it rises, the chase above $6 is being bought ahead of the number; if it falls, the $6 line is being rolled up or cashed. We're watching the Nov 20 $4 puts: clear 4,500 by Thursday and the print is being hedged, stay flat and Wednesday's 250 was churn. We're watching the Jan $6 calls settle, buying or cashing. And we're watching Friday's close against $5.50, because everything above is downstream of it.

The setup

At $5.74 the market is paying about $1.34 a share for POET's business on top of roughly $4.40 a share in cash. On Monday it was paying 80 cents. A week ago it was paying nothing. The business didn't change this week; the bets did. Read the map, then read the document Monday morning, and don't confuse the two.

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