| From: Don Green | 12/14/2022 6:20:57 PM | | | | | | SEC Proposes New Best-Execution Rule, Draws Criticism
By Melanie Waddell
SEC Chairman Gary Gensler, however, stated at the open meeting that when he arrived at the agency he was “surprised” to learn that the SEC didn’t have a best-execution rule. “FINRA plays a really critical role as a membership organization for broker-dealers … it’s an important part of the mix, but I would say that we have many rules where the SEC has a role and FINRA has a role.”
Republican Commissioner Mark Uyeda opined that “an obvious problem with this proposal is that there are already existing best execution regulatory regimes, which appear to be working well. This rule proposal would add a third best execution regime layered on top of the ones already imposed by FINRA and the MSRB. Do we need another one?“
Payment for Order FlowRon Rhoades, associate professor of finance at Western Kentucky University and director of its personal financial planning program, told ThinkAdvisor in another email that “while having a best execution rule that the SEC itself can enforce (rather than just FINRA) is a positive step, I don’t foresee that this rule will dramatically improve trade execution quality for customers of broker-dealers.”
The SEC’s proposed rule “continues to permit payment for order flow, an insidious conflict of interest and a means of doing business that was popularized by Bernie Madoff. In the end, under principles of agency, the execution of trades on behalf of a broker’s customer imposes upon the broker a fiduciary duty to act in the customer’s best interest when executing the trade,” Rhoades said.
“If the broker has the opportunity to secure additional compensation, such as through payment for order flow, this conflict of interest will lead to breaches of the fiduciary obligation,” according to Rhoades. “Simply put, a fiduciary cannot serve two masters.”
‘Complicated’ Market ChangesThe SEC proposed its new Regulation Best Execution as part of a package of broad equity market structure changes.
The agency adopted amendments to Rule 10b5-1 and new disclosure requirements to enhance investor protections against insider trading; proposed amendments to update the disclosure required for order executions in national market system (NMS) stocks; proposed amendments to the minimum pricing increments, also known as tick sizes; as well as proposed a rule to require certain orders of individual investors to be exposed to competition in fair and open auctions.
Gail Bernstein, general counsel for the Investment Adviser Association in Washington, added in another email that “the SEC issued a package of extremely complicated equity market structure rule proposals under the Exchange Act that, if adopted, will change the landscape for how retail orders are quoted, priced, routed, and filled.”
Among other things, Bernstein continued, “the package calls for retail equity orders to be exposed in open auctions, changes broker-dealers’ best execution obligations, and requires significant new disclosures relating to treatment of retail orders.” IAA, Bernstein said, “will review these proposals carefully to assess their potential implications for investment advisers.”
Ken Bentsen, president and CEO of the Securities Industry and Financial Markets Association, added in a statement that “the substantial changes proposed today by the SEC are incredibly complex with material impact to all market participants, but particularly to investors. We strongly believe the SEC needs to be extremely careful in its approach.”
Added Bentsen: “Any changes being proposed in the name of competition which may tilt the playing field at the expense of investors should be weighed carefully, be subject to a robust cost benefit analysis, and considered holistically with a view to ensuring there are no negative, unintended consequences for investors.”
As the proposals issued Wednesday “are significantly complex and interrelated, it is essential the SEC provide an adequate comment period to allow all parties sufficient time to provide thoughtful input on the package of proposals,” Bentsen said. |
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| From: Don Green | 12/15/2022 12:57:21 PM | | | | | | Sam Bankman-Fried on GME and AMC Tokenized Shares
Short sellers allegedly used Sam Bankman-Fried's crypto exchange, FTX, to manipulate the share prices of AMC and GME stock.Bankman-Fried, who has been arrested on charges of financial fraud, gave an interview in which he commented on the issue of tokenized shares of GME, AMC, and others.
How Were Short Sellers Using FTX to Trade AMC and GME?A few weeks ago, a report in The Chainsaw alleged that short-selling hedge funds were using crypto exchange FTX as a "back door" to shady trading practices.
FTX, which has filed for bankruptcy, gave traders the option to trade synthetic shares and tokenized stocks, which consist of digital assets that replicate the price action of real stocks.
However, under FTX's terms, customers could redeem their tokenized stocks through FTX's Swiss operations for underlying shares, if desired.
According to The Chainsaw report, however, FTX attested that its 10 million GameStop ( GME) - Get Free Report and 400 million AMC Entertainment ( AMC) - Get Free Report digital tokens were backed by GME and AMC shares insured under CM-Equity's custody.
However, FTX severed ties with CM-Equity in late 2021, suggesting that throughout 2022 there were neither GameStop nor AMC shares under the custody of the escrow agent.
Raising even more suspicion about the case, FTX removed the white paper on AMC tokens from its website in late November.
What Did SBF Say About GME and AMC?The founder and former CEO of FTX, Sam Bankman-Fried (aka SBF), has been in the media spotlight recently following the insolvency crisis at FTX.
Over the past few years, FTX became one of the world's top three crypto exchanges. However, the misuse of its customers' funds — $10 billion of its customers' money "disappeared" — led to a crisis that has been compared to the notorious Enron scandal and other Ponzi schemes.
Recently, Bankman-Fried was arrested in the Bahamas and charged with wire fraud, securities fraud, and money laundering.
Before his arrest, SBF gave an interview with Unusual Whales. Among other questions, he was asked about whether the tokenized shares of GME and AMC were backed one-to-one. He answered that he thought they were:
However, Bankman-Fried also said that he doesn't have an updated answer to this question after the FTX collapse. But he added that he considers this a reasonable question and has committed to giving a better answer soon.
How Could FTX Have Influenced GME's and AMC's Share Prices?GameStop and AMC may have been influenced due to the cost to borrow their shares, which is based on supply and demand.
Short sellers who want to bet against GME and AMC need to borrow shares to proceed with their trades.
GameStop borrow rates currently stand at 7.5% annualized. However, throughout this year, GME shares were rare and therefore hard — and expensive — to borrow on several occasions.
For example, the stock split at the end of May caused borrow fees to jump by nearly 130%. And fees remained sky-high, at 30%, during July and August.
Currently, AMC is also a hard-to-borrow stock, with annualized fees of 23%. However, in mid-November, AMC borrow fees reached over 100% annualized.
In theory, if short sellers were redeeming GME and AMC tokenized shares through FTX without the use of a custody agent, they could have avoided paying high borrowing fees.
We Need More Clarity From SBFThe Chainsaw's allegations of trading irregularities facilitated by FTX, while well-founded, have yet to be confirmed.
Hard evidence is needed that brokerage firms have used FTX's tokenized stocks to short the stocks. Even though Sam Bankman-Fried has not given a final answer on this issue, it's unclear whether any wrongdoing has technically occurred, thanks to regulatory confusion surrounding cryptocurrencies.
U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler has addressed this issue. He said in September that he has been working with Congress toward the regulation of crypto security tokens and related intermediaries.
SBF's arrest the day before his scheduled testimony before Congress has frustrated the American public. They deserve to hear about the wrongdoings at FTX directly from him.
However, congressional officials hope that another hearing with SBF will take place shortly to clarify several unresolved issues — such as the matter of tokenized shares.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)
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| From: Don Green | 12/16/2022 9:51:24 AM | | | | | | Everything you need to know about the math of Powerball
With a record-setting $1.9 billion jackpot, you’d think it’s a no-brainer to buy a Powerball ticket. But the math truly shows otherwise.
Playing the lottery is the ultimate low-risk, high-reward scenario. If you lose, you’re only out a few dollars: the cost of your bet. But if you win, even though the odds are stacked against you, the payoff is potentially life-changing, promising a lifetime of easy, luxurious living. You could not only realize all of your dreams that are reliant on financial fortunes, but those of your friends and relatives as well. And here in November of 2022, the Powerball jackpot has hit a whopping new record of $2.04 billion, a new record not just in terms of Powerball, but among all lottery games worldwide.
In order to win, you need to match five normal lottery numbers — white balls numbered 1-through-69 — plus the Powerball: a red ball numbered 1-through-26. Each Powerball ticket costs $2, plus you have the option to pay an extra $1 to activate the power play, a multiplier that increases your payout for non-jackpot prizes.
With a jackpot of $2.04 billion, plus an array of smaller prizes for matching some (but not all) of the balls drawn, here’s everything you need to know about what math says about playing the Powerball lottery.
Having just reached a record $2.04 billion, the Powerball Jackpot of November 7, 2022 has just broken the record for richest lottery jackpot in history. A single winner, excluding taxes, would fall into the top 2000 worldwide in terms of richest people alive today. ( Credit: Julio Cortez/AP)In particular there are some questions you should ask if you’re interested in the math behind Powerball:
What are your odds of achieving each individual winning combination?How much does each winning possibility pay out?Is it worth it to activate the power play option?And finally, how big does the jackpot have to be in order for playing the Powerball lottery to be “worth it” from a mathematical point-of-view?The idea of “worth it” is a subjective one to most people, but from a scientific/mathematical standpoint, it has a very particular meaning. It means that the amount you can expect to win, given an average outcome for the ticket, is greater than the amount you have to bet in order to play. If a Powerball lottery ticket costs $2, for example, buying a ticket would be above the “worth it” line if:
You had a 51% chance of winning $4.Or, you had a 0.1% chance of winning $2001.Or, you had a 1-in-499,999 chance of winning $1,000,000.But buying a ticket would fall below the “worth it” line if:
You had only a 49% chance of winning $4.Or, you had a 0.1% chance of winning $1,999.Or, you had a 1-in-500,001 chance of winning $1,000,000.
This photo, taken at the Money Museum in Chicago, shows what $1,000,000 in cash, in twenty dollar bills, looks like. This is the ‘second prize’ in the Powerball jackpot, with roughly 1-in-11 million odds of such an outcome in Powerball. ( Credit: Steve Rhodes/flickr)Notice how small these differences are, but how in the earlier cases, you can expect to win more than you bet, while in the latter cases, you expect to bet more than you win. This is only an average, of course, but it comes out that way because:
A 51% chance of winning $4 means that an average ticket is worth $2.02.A 0.1% chance of winning $2001 means that an average ticket is worth $2.001.And a 1-in-499,999 chance of winning $1,000,000 means that an average ticket is worth $2.000004.On the other hand, for the latter examples — the ones that fall below the “worth it” line — the translation from probability to ticket worth works out as follows:
A 49% chance of winning $4 means that an average ticket is worth $1.98.A 0.1% chance of winning $1999 means that an average ticket is worth $1.999.And a 1-in-500,001 chance of winning $1,000,000 means that an average ticket is worth $1.999996.Mathematicians call this ratio of how-much-you-win vs. how-much-you-bet the expected value (or expectation value) of a problem. If your expected value is greater than 1.0, or more than the cost of a ticket, then it’s worth it to play. (And if not, then it isn’t!)
This diagram shows the likelihood of achieving outcomes within one, two, and three standard deviations of the mean value, assuming a Gaussian random distribution (i.e., Bell curve) of possible outcomes. Less likely outcomes, at the tail end(s) of this distribution, are often where the most interesting events occur. To get your expected value, you must multiply the odds of each possible outcome by the ‘reward’ for achieving each outcome. ( Credit: Ainali/Wikimedia Commons)That’s the general idea for any sort of gambling/gaming event: work out the balance between your odds of winning a prize (or all of the possible prizes) multiplied by how much that prize is actually worth, and then compare that to the actual cost of the “chance” you buy, to determine how much value each lottery ticket actually holds.
Specifically, then, what does this mean for the game of Powerball?
Let’s work it out.
In every game of Powerball, you get one ticket with five white numbers (out of 69 possible choices) and one red number (the Powerball, out of 26). In order to work out what the expected value is for each Powerball ticket, the first thing we have to do is understand what the set of possible outcomes are, and what your odds are of achieving each one. Here’s an infographic I made that breaks down what your odds are, on each ticket — remember, with five white numbers between 1-and-69 and one red number between 1-and-26 — of achieving each possible outcome.
The odds of achieving every possible outcome with a Powerball ticket as each and every relevant number is drawn. Note that the most likely outcome, of matching no numbers at all, is 65.23% likely, and that a total of 95.98% of the time, no prizes are awarded. (Credit: E. Siegel)Your odds of actually winning the Powerball jackpot are pretty slim: one in 292,201,338. In fact, your odds of winning anything aren’t very good either, since the three most common results are:
no matches of any type (65.23%),one white ball and no Powerball (27.18%), andtwo white balls and no Powerball (3.565%).Those three options all pay out absolutely nothing, and add up to 95.98% of the possible results. In other words, without hitting the Powerball, you need at least three white balls to win anything at all.
That leaves the remaining 4.02% of the time as the only chances you have to actually win something. If the prizes that winning pays out — on average — crosses over a large enough threshold, it will be worth it to bet, and worth it to buy a ticket and play the game.
The possible options, which make up 4.02% of all Powerball tickets sold, for what you should match to win that prize, what the prize for winning is, and what your odds of achieving that specific outcome are. ( Credit: E. Siegel, data from Powerball.com)These prizes vary tremendously in both your odds of achieving them and also in how much they pay out, assuming you do win them. According to the official Powerball site:
Getting the Powerball with either 0 or 1 match from the white balls earns you $4.Hitting either the Powerball with 2 matching white balls or missing the Powerball but hitting 3 matching white balls earns you $7.Hitting either the Powerball with 3 matching white balls or missing the Powerball but hitting 4 matching white balls earns you $100.Hitting the Powerball with 4 matching white balls earns you $50,000.Missing the Powerball but hitting all 5 matching white balls earns you $1,000,000.And, of course, hitting all the numbers — the Powerball and all 5 white balls — earns you the Grand Prize.If you want to calculate your expected value of each Powerball ticket purchased, you need to multiply your odds of winning each prize by the payout of each possible prize, and then add them all together to find out the total worth of each ticket. Given that each Powerball ticket costs $2, with an additional $1 possible for selecting the “Power Play” option, and that the “Grand Prize” payout depends both on the total jackpot amount and how many co-winners there are.
That said, we’ll come back to both the Power Play option and the Grand Prize payout in a bit; first, let’s look at the more likely non-Jackpot options.
The possible combinations of outcomes, the odds of achieving that outcome, the payout, and the contribution of that payout to the expected value of a $2 Powerball ticket. Note that the larger, less-likely prizes only contribute pennies to the overall value of a ticket. (Credit: E. Siegel)For every $2 ticket you buy, you can expect to recoup, on average:
about $0.15 from the periodic $4 payouts,about $0.02 from the periodic $7 payouts,about $0.01 from the periodic $100 payouts,about $0.05 from the periodic $50,000 payouts,and about $0.09 from the periodic $1,000,000 payouts.That means, all told, that the non-jackpot options make each ticket worth only about $0.32, which is a far cry from the $2 you invested. This teaches us two things:
It gives us the information we need to figure out how much the “Power Play” option is actually worth.It let’s us know how much the Jackpot needs to pay out in order for buying a Powerball ticket to be “worth it,” mathematically.First, let’s take on the Power Play option.
The odds of a Power Play along with the prize increases from using the Power Play option, with the odds given when the 10x multiplier both is and is not active. ( Credit: Screenshot from Powerball.com)The Power Play option — which costs an extra $1.00, turning a $2 ticket into a $3 ticket — does the following:
has no effect on the Jackpot/Grand Prize,always doubles the payout of the second-most-lucrative prize, andhas a 1-in-1.75 chance of doubling (2x), a 1-in-3.23 chance of tripling (3x), a 1-in-14 chance of quadrupling (4x), or a 1-in-21 chance of quintupling (5x) the other prizes.If the 10x multiplier is active (only for Jackpots under $150 million), it reduces the chances of all the other options very slightly, and adds in a 1-in-43 chance of tenfold-multiplying (10x) all but the top two prizes.So what’s the extra expected payoff for this additional $1 investment?
It transforms the expected worth of the non-jackpot options, per ticket, from being worth $0.32 up to being worth $0.81. This means you’re spending an extra $1.00 to increase your expected payout by $0.49, a lousy deal any way you slice it.
In fact, even if you happened to hit the 5x option, which happens only about 5% of the time, you only up your expected winnings to $1.34 for the non-jackpot options, which increases your winnings by a mere $1.02. That’s what you need to make it “worth” grabbing the Power Play option: a guaranteed 5x multiplier or better. The fact that the second-biggest-payout is only doubled, no matter what the Power Play multiplier happens to be, makes this a raw deal any way you slice it.
In other words, unless you know you’re guaranteed to get either the 5x or 10x multiplier, you should never take the Power Play option.
With a new record of a $2.04 billion Powerball Jackpot, a sole winner would become the largest-Jackpot lottery winner in history, immediately making them worth more (minus taxes, of course) than Christian Birkenstock, Michael Jordan, and Rihanna. ( Credit: Julio Cortez/AP)So finally, we come to the big prize: the Jackpot, or the Grand Prize, which you win by hitting all five numbers plus the Powerball, something that has a one-in-292,201,338 chance of happening. Given that your ticket costs $2, and the “rest of your ticket” is worth $0.32, it would make sense that as long as the expected value is $1.68 or higher from the Powerball Grand Prize, you’ll come out ahead, and should play.
And that’s correct, mathematically speaking! If your ticket costs $2, but is worth more than $2, it’s mathematically advantageous to play, and to purchase it.
But be careful, because this next step — from a mathematical point of view — is where they trick you. You might think, “Hey, so long as the Powerball Jackpot is more than $245 million, if my odds of winning are 1-in-292 million, I’ll come out ahead of the ‘$1.68 expected value’ per $2 ticket for winning the Jackpot.” But this is wrong for two reasons.
You have to pay taxes on your winnings, and the average Jackpot winner (dependent on your state’s specific tax laws) who takes the lump sum option only gets to keep about 37.2% of the Grand Prize’s value.This also assumes that your winning ticket will be the only winning ticket, but the more people who play, the greater the odds that there will be multiple Grand Prize winners who have to split the prize.
At top, the Powerball ticket sales projections dependent on the size of the Jackpot; over half a billion tickets are expected for each Jackpot over $1 billion. At bottom, the expected value of a $2 Powerball ticket, which, when accounting for taxes and split Jackpots, peaks at Jackpot values of around half a billion dollars and decreases thereafter. ( Credit: Jeremy Elson)Taxes not only crush the expected payout from the Grand Prize, but also the second-largest prize as well: the $1,000,000 for hitting all five white numbers without the Powerball. The average payout for “winning $1,000,000” is only $590,000, which reduces your average ticket’s value by about $0.04 from what we just calculated before. But it’s the notion that “There will be one winner, and that winner will be me” that’s truly erroneous.
If 190 million tickets are sold — pretty typical for a near-$1B Jackpot — the odds are:
34% that no one wins the Jackpot,37% that only one person wins the Jackpot,and 29% that two or more people win, and split, the Jackpot.The greater the Jackpot, the greater the number of people who buy tickets. But once more than about 200 million tickets are sold, which happens at greater Jackpot levels, the less valuable each ticket becomes! A ticket sold for a $1,500 million (or $1.5 billion) Jackpot, in fact, would only be worth about half as much as a ticket sold for a $500 million Jackpot, because you’d most likely have to split the Jackpot, even if you won, with between three and seven other people.
All told, when you take both taxes and split Jackpots into account, you find that even at its maximum value, a $2 Powerball ticket is really only worth about $0.852, or just 43% of what you paid for it. If throwing $1.15 away is worth the amount of fun you’ll have, go right ahead. $0.85 of your ticket goes toward a “fair” lottery; the remaining $1.15 is simply your donation to whatever programs the Powerball lottery supports!
Starts With A Bang is written by Ethan Siegel, Ph.D., author of Beyond The Galaxy, and Treknology. Pre-order his Encyclopaedia Cosmologica here! |
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| From: Don Green | 12/22/2022 4:01:44 PM | | | | | | AMC Entertainment plunges 25% as company raises equity, swaps debt and converts APEs
 Victor J. Blue
AMC Entertainment (NYSE: AMC) shares plunged more than 25% in premarket trading on Thursday as the movie theater chain announced a slew of financial transactions, including raising $110M in equity, swapping debt for equity and said it was considering converting preferred shares into common stock.
As part of the announcement, AMC Entertainment ( AMC) said it would sell AMC Entertainment Hldg Pref Equity Units ( APE) to Antara Capital at a weighted average price of $0.66 per share. The closing price yesterday was $0.685.
APE shares soared more than 113% to $1.46 in premarket trading, while AMC's ( AMC) common stock plunged on the news.
In addition, AMC ( AMC) said it cut its debt load by $100M, reducing its 2nd lien notes due in 2026 that were held by Antara in exchange for the 91M APE units.
The company also said it intended to have a special shareholder meeting to vote on proposals from its board of directors to convert APE units into common stock and reverse split its stock at a 1-10 ratio.
“AMC’s ongoing capital raising efforts and balance sheet strengthening continues in earnest," Adam Aron, Chairman and CEO of AMC Entertainment said in the statement.
“Clearly, the existence of APEs has been achieving exactly their intended purposes," Aron added. "They have let AMC raise much welcomed cash, reduce debt and in so doing deleverage our balance sheet and allow us to explore possible M&A activity. However, given the consistent trading discount that we are routinely seeing in the price of APE units compared to AMC common shares, we believe it is in the best interests of our shareholders for us to simplify our capital structure, thereby eliminating the discount that has been applied to the APE units in the market.”
On Wednesday, it was reported that AMC Entertainment ( AMC) ended its talks with Cineworld ( OTCPK:CNNWQ) lenders to buy some theaters in the U.S. and Europe. |
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| To: Don Green who wrote (895) | 12/22/2022 4:04:24 PM | | From: Don Green | | | | AMC Entertainment: Conversion Of APE Into AMC On The Horizon
Tom Cooper
Back in August 29 2022, AMC Entertainment Holdings, Inc. (NYSE: AMC) launched a preferred equity unit ( APE) as a special dividend to AMC shareholders. This APE preferred equity unit is economically more or less the same thing as a share. However, AMC couldn't issue any more shares at the time and resorted to this preferred that's the same in all but name.
It would have made the most sense if AMC had halved on that day and both AMC and APE traded at 1/2 the previous day's AMC value. But that's not what happened. Instead, AMC holders continued selling AMC but dumped APE:
 Data by YCharts
This led to a bizarre valuation discrepancy between the two securities that are otherwise very similar.
This morning, AMC dropped a bomb as it raised a lot of capital by issuing a monstrous amount of APE units:
Raises $110 million of new equity capital through the sale of APE units to Antara Capital, LP (“Antara”) at a weighted average price of $0.660 per share. The APE closing price on the NYSE on December 21, 2022 was $0.685.But the biggest news of all is that the company seeks a shareholder meeting to vote on the voluntary conversion of APE into AMC. Of course, any AMC holder would vote against but according to the last 8-K, there are 516,838,912 AMC shares outstanding. The company issued one APE for each AMC, but according to the December 19 8-K, it issued another 125.9 million AMC Preferred Equity Units through an at-the-market program AND it is issuing another ~250 million units (emphasis added by me):
The sale of APE units to Antara will be split into two tranches. The first tranche involves the immediate purchase by Antara of 60 million APE units under the Company’s at-the-market program (“ATM program”). The second tranche, for the purchase of approximately 106.6 million APE units, as well as the $100 million debt exchange (for 91 million APE units), are subject to the completion of the waiting period under Hart-Scott-Rodino (“HSR”).
If my calculations are correct after this transaction, there will be roughly 516 million AMC units outstanding and ~886 million APE's.
 Excerpt of latest AMC 10-Q Balance sheet (AMC 10-Q)
If all units and shares get voted, the APE's have a ~63% to 37% advantage. Many hedge funds and professional investors hold APE and short AMC due to the valuation anomaly. Meanwhile, AMC is famous for its diamond-hand retail shareholder base. I would think it is more likely a higher percentage of the APEs get voted. The enthusiasm of many AMC holders has likely waned as the share price declined 83% year-to-date:
 Data by YCharts
It will be tough for AMC holders to defend against this conversion. At the same time, it ultimately hurts AMC and APE holders if these securities are not convertible. The company keeps raising capital, issuing enormous numbers of APE units, while it could have raised similar amounts of capital by issuing much smaller numbers of AMC shares.
 Data by YCharts
Pre-market, the APE shares jumped ~90% and AMC shares dropped over 20%. The AMC debt has traded up as bankruptcy becomes less likely after the capital raise and debt exchange. In addition, the conversion would lead to a situation where it becomes cheaper to raise equity capital which also helps solidify the debt.
Depending on where prices are as you are reading this, I think the long APE / short AMC trade makes more sense than ever. There is visibility into a catalyst to make them convertible. I already had this trade, but sized it very small because of the short-squeeze history with AMC. I already owned some AMC June 25' debt with a coupon of 5.75%. It trades at 37 cents on the dollar. I think the outlook for the debt improved the most. I also sold AMC (now combined AMC/APE called AMC1) puts when volatility was high in the past. I'm not quite sure how these are going to work out in this situation. I'm not adding to those. |
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| From: Don Green | 12/23/2022 5:25:47 PM | | | | | | Mega Millions jackpot up to $510 million before Christmas
Kelly Tyko
 The Dec. 23 Mega Millions jackpot has an estimated $510 million jackpot. Photo: John Smith/VIEWpress via Getty Images
More than half a billion dollars is up for grabs in the year's second-largest Mega Millions jackpot ahead of Christmas.
Driving the news: The lottery jackpot for Friday's drawing is an estimated $510 million or a cash option of approximately $266.8 million cash, Mega Millions said in a statement.
If Friday’s drawing has one or more winning tickets, the jackpot is estimated to be the 11th largest in the lottery's 20-year history.Flashback: In late July, a ticket sold in Illinois was the sole winner of the year's largest Mega Millions jackpot of $1.34 billion, the game's second-largest prize ever.
The last Mega Millions jackpot was won Oct. 14 when a $502 million prize was shared by winning tickets in California and Florida.The jackpot has been rolling since the Oct. 18 Mega Millions drawing that started with a $20 million grand prize.Meanwhile, 2022 has been a year of big jackpots.
The world's largest-ever lottery prize was won in November when one ticket won Powerball's $2.04 billion jackpot.When is the Mega Millions drawingMega Millions' drawings are held in Atlanta at 11pm ET Tuesdays and Fridays, which is 8pm PT.
The drawings are posted on the Mega Millions YouTube page.How it works: Two machines pick the numbers in the drawings with the first picking five white balls and the other selecting a gold “Mega Ball.”
Odds of winning Mega MillionsThe odds of winning the grand-prize jackpot are about 1 in 303 million per ticket.
Other odds vary by prize and range from 1 in 37 for matching the Mega Ball to 1 in 12.6 million for matching five balls without the Mega Ball.By the numbers: There have been only six Mega Million jackpot winners so far in 2022.
Since 2017, the number of jackpots won per year has ranged from five to seven.Mega Millions lottery ticket priceA Mega Millions ticket costs $2, but players in most states can "add the Megaplier for an additional $1 to multiply their non-jackpot prizes."
Context: Out of each $2 ticket, roughly 35 cents goes to non-jackpot prizes, about 75 cents goes to fund the jackpot, and the remaining 90 cents goes to the government.
How to play Mega Millions gameLottery players can pick six numbers from two separate pools of numbers — five different numbers from 1 to 70 (the white balls) and one number from 1 to 25 (the gold Mega Ball).
“Quick Pick” or “Easy Pick” tickets can also be purchased where numbers are selected automatically.States that sell Mega Millions lottery ticketsMega Millions tickets are sold in 45 states, Washington, D.C., and the U.S. Virgin Islands, with drawings held each Tuesday and Friday.
Alabama, Alaska, Hawaii, Nevada and Utah do not participate in the lottery.Mega Millions cut-off time: How late to buy ticketsThe deadline to purchase tickets for Friday's drawing varies by state because Mega Millions tickets are sold by individual lotteries.
Sales stop 15 minutes before the drawing in many states, including New York, Michigan, Virginia and Ohio, while Indiana sales on drawing dates cut off at 10:44pm ET.Lotteries in Florida and South Carolina end ticket sales an hour before the drawing, with Idaho ending the night's drawing sales an hour and five minutes prior.Where to buy Mega Millions tickets onlineMega Millions tickets are available to buy online in 10 states and Washington, D.C.
New York also has a subscription to purchase tickets online.Other states with online sales are Georgia, Illinois, Kentucky, Michigan, New Hampshire, North Carolina, North Dakota, Pennsylvania and Virginia.In most cases, you need to live in one of these states to buy an online ticket, but in "all cases you must be physically within their borders when you make any online ticket purchases," the Mega Millions website says.Mega Millions prizes: How much for matching numbers Here are the prize amounts for matching numbers with and without the gold Mega Ball:
Mega Ball: $2 One number and Mega Ball: $4Two numbers and Mega Ball: $10Three numbers: $10Three numbers and Mega Ball: $200Four numbers: $500Four numbers and Mega Ball: $10,000Five numbers: $1 millionFive numbers and Mega Ball: JackpotBetween the lines: Amounts for non-jackpot prizes are higher for players spending $1 extra for the optional Megaplier. |
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| From: Don Green | 1/12/2023 9:54:47 AM | | | | | | Data dictates who will win the Mega Millions lottery
The Mega Millions Lottery jackpot has now soared past $1.3. billion. This follows the Powerball lottery grand prize payout of $2 billion this past November. The chance of winning the Mega Millions grand prize is around one in 302 million, slightly worse than the one in 292 million for Powerball — both miniscule odds. However, when there are enough combinations of numbers picked, the likelihood that someone wins increases. The challenge is knowing who that person will be.
Winning the lottery provides images of a carefree life and providing funds to support family and friends. In the ideal, those are all possible outcomes that comes with winning, whether it be $1 billion, $100 million or even $10 million. These are viewed as sizeable prizes for most people who buy lottery tickets.
Yet, for every winner who uses the money wisely, there are winners who squander what is effectively an inheritance. The potential good that could be realized from their winnings end up being a liability that they could not have foreseen.
Lotteries are not entertainment. They are a business, and a highly regressive tax. The majority of people who purchase lottery tickets are low-income earners. These people can ill afford to squander their limited resources on the remote chance of winning a large prize that they believe will change their life for the better. The majority lose, which is how lotteries stay in business.
Payouts from lotteries typically run between 50 and 70 percent. With the excess or profit that remains, some is used to pay lottery expenses. The rest is kept by the state who runs the lottery or has a share in the lottery.
Some states advertise that the earnings from lotteries are used to support public schools. Illinois says that certain lottery earnings will go to the state’s Common School Fund. In reality, this is marketing, since they can say that the money can be used for anything. By directing lottery earnings to fund schools, it frees up general funds for other activities. States can play a shell gameto give the illusion that lottery earnings are used benevolently.
This implicitly suggests that lotteries will not show a deficit. Will school funds be required to cover such a shortfall? Of course not, since lotteries are designed to reap sizeable surpluses. Winnings paid out are set to not exceed what is collected.
For low-income earners who buy lottery tickets, dreams of a big win that will enable them to escape from their financial quagmire is an illusion. The majority of people who win a large lottery prize end up having little to show for it within just five years. In some cases, the winners are worse off than before their lottery win, as they make lifestyle changes, including quitting their job and purchasing expensive items, which they are often ill-equipped to manage.
Winners are also preyed upon by family and friends, seeking to cash in on the winner’s fortunes. Scammers are quick to outsmart such people and look for ways to take their share of the winnings.
Then there are tax management issues, which many lottery winners never had to deal with. Without the assistance of trustworthy tax and investment advisers, a simple life can quickly unravel.
So, who wins the lottery when a large payout occurs?
It is the lottery agency themselves. When payouts reach astronomical levels, like the upcoming Mega Millions payout, more people are willing to shell out a few dollars to win the chance for the grand prize. With more people buying tickets, the grand prize increases — and the agency profits soar.
The best strategy for those who spend their money on lotteries is simple: Don’t buy a ticket. If a person spends $20 every week on the lottery, the $1,000 they spend annually may give them some entertainment value. It will not however yield a positive return on investment.
Unfortunately, the very people who can ill afford to throw their money away are also the very people who are most prone to buy lottery tickets.
Those who do not buy lottery tickets also benefit from additional funds added to state coffers that they are not required to contribute to. It serves as a tax credit for them, paid for by those who buy lottery tickets. They, with the states and agencies who run the lotteries, are the big winners.
So, when the lottery jackpot reaches $1 billion dollars, the data say, avoid buying a ticket and thank those who do for contributing to your state’s general fund.
Sheldon H. Jacobson, Ph.D., is a professor in computer science at the University of Illinois Urbana-Champaign. A data scientist and operations researcher, he applies his expertise in data-driven risk-based decision-making to evaluate and inform public policy.
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| From: Don Green | 1/19/2023 4:54:57 PM | | | | | | $20M Mega Millions jackpot won in New York in first drawing after almost $1.35B Maine winThe Mega Millions jackpot has been won – again.A lucky ticket in New York matched all six numbers to win the $20 million jackpot Tuesday night.Tuesday's win follows the $1.348 billion Mega Millions jackpot that was won in Maine on Friday – which marked the second-highest prize in the lottery game's history.After not having been hit for months, the Mega Millions jackpot has been won in back-to-back drawings.
One ticket sold in New York in Tuesday's drawing matched all six numbers to win the $20 million jackpot, according to the Mega Millions website. Tuesday's winner can also choice the cash option of $10.6 million.
It's a far cry from the $1.348 billion Mega Millions jackpot won in Maine on Friday.
In addition to the jackpot, a ticket sold in Massachusetts matched all five white balls and had the Megaplier to win $3 million.
The jackpot will reset again to the current starting value of $20 million for Friday's drawing.
Meanwhile, the Powerball jackpot is at $439 million with a cash option of $237.3 million, according to the Powerball website.
Are lottery prizes getting bigger? Here's why the jackpots have grown so large.
Friday: Winning ticket for almost $1.35 billion Mega Millions jackpot sold in Maine
Mega Millions winning numbers: 1/17/23The winning numbers for Tuesday night's drawing were 2-12-18-24-39, Mega Ball: 18 and Megaplier was 3X.
When is next Mega Millions drawing?Mega Millions drawings are held every Tuesday and Friday at 11 p.m.
How do I play Mega Millions?The cost is $2 per ticket, but you can add the Megaplier for $1, which will increase the amount of your potential prize up to five times the original prize (except for the jackpot).
Each player selects five numbers from 1 to 70 for the white balls and one number from 1 to 25 for the Mega Ball. However, you can also have the lottery machine generate a random Quick Pick for you.
Prizes vary from $2 for the matching the Mega Ball to $1 million for matching all five white balls (except in California) to the jackpot for matching all six balls. You can check all the prize payouts on the Mega Millions site.
What do you do if you win the lottery? Here's what you need to know.
You don't need to be a U.S. citizen or a resident a particular state where you purchase your ticket.
Where can I play Mega Millions?You can play the game in 45 states plus the District of Columbia and the U.S. Virgin Islands. The states not offering Mega Millions are: Alabama, Alaska, Hawaii, Nevada and Utah.
Many grocery stores, gas stations and convenience stores sell lottery tickets. Some states allow Mega Millions tickets to be purchased online, but beware of scam websites. Check with your state lottery for more details.
What are my odds of winning?Playing the Mega Millions can be exciting, but just don't go spending those millions before you win.
The odds of winning the jackpot are 302,575,350-to-1.
The odds to match all five white balls are 12,607,306-to-1.
What does a lottery's cash option mean?The major lotteries in the United States offer two jackpot payout options: annuity and cash.
The annuity option is paid out over time. There is an immediate payment and then 29 annual payments after that, increasing by 5% each year.
How much will Mega Millions winner get after taxes? $1.35 billion jackpot shrinks quite a bit
The cash option is significantly lower than the advertised jackpot, but it is paid in a lump sum. You don't have to wait decades for all the money.
What was biggest Mega Millions jackpot?Here are the Top 10 jackpots ever since the Mega Millions began in 1996:
$1.537 billion, Oct. 23, 2018: Won in South Carolina$1.348 billion, Jan. 13, 2023: Won in Maine$1.337 billion: July 29, 2022: Illinois$1.05 billion, Jan. 22, 2021: Won in Michigan$656 million, March 30, 2012: Three winners in Illinois, Kansas, Maryland $648 million, Dec. 17, 2013: Two winners in California, Georgia$543 million, July 24, 2018: Won in California$536 million, July 8, 20116: Won in Indiana$533 million: March 30, 2018: Won in New Jersey $522 million: June 7, 2019: Won in CaliforniaWhat's everyone talking about? Sign up for our trending newsletter to get the latest news of the day
What was largest U.S. lottery jackpot ever?Here's a look at the top jackpots were won in the United States, between the Powerball and the Mega Millions lotteries:
$2.04 billion, Powerball, Nov. 7, 2022: California$1.586 billion, Powerball, Jan. 13, 2016: Three winners in California, Florida, Tennessee$1.537 billion, Mega Millions, Oct. 23, 2018: Won in South Carolina$1.348 billion, Mega Millions, Jan. 13, 2023: Won in Maine$1.337 billion, Mega Millions, July 29, 2022: Illinois$1.05 billion, Mega Millions, Jan. 22, 2021: Won in Michigan$768.4 million, Powerball, March 27, 2019: Won in Wisconsin$758.7 million, Powerball, Aug. 23, 2017: Won in Massachusetts$730 million,, Powerball, Jan. 20, 2021: Won in Maryland$699.8 million, Powerball, Oct. 4, 2021: Won in California |
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| From: Don Green | 2/15/2023 7:47:23 AM | | | | | | It's a Trap! Why You Shouldn't Bet Against the Price Difference in AMC Stock and APE SharesDespite the price differences between AMC's common and preferred shares, using an arbitrage trading strategy could be too risky. Here's why.
Bernard ZamboninFeb 14, 2023 5:39 AM EST
AMC Preferred Equity (APE) units are currently trading for a few dollars lower than AMC Entertainment's common stock.Many traders — including Jim Chanos — are betting that AMC shares will plunge to meet the value of the APE units.It is possible that APE will rise to match the price of AMC stock, rather than AMC falling to match APE units.
 Figure 1: It's a Trap! Why You Shouldn't Bet Against the Price Difference in AMC Stock and APE Shares
Noam Galai | Credit: WireImage
Read also: Why AMC Stock Might Be Ready for Another Short Squeeze
What Is the AMC/APE Arbitrage Strategy?Ever since the creation of AMC Entertainment's ( AMC) - Get Free Report preferred shares — the AMC Preferred Equity (APE) units — many traders have been using an arbitrage strategy. This involves exploiting the price difference between the two.
After all, theoretically, AMC and APE should be trading at the same price because they share the same underlying assets.
But APE shares have been trading around $2, reaching $3 in January. At the same time, AMC shares have been trading around $5, reaching $6.80 in the first week of February.
Famed short-seller Jim Chanos is among the many traders who have employed an arbitrage bet. A few months ago, he revealed that he had a short position in AMC while "going long" APE.
In a nutshell, he's betting that AMC shares will come down to APE's level. However, Chanos' AMC strategy has not yet paid off.
Why an AMC Arbitrage Strategy Is a Bad IdeaThe AMC/APE arbitrage trade isn't as simple as it looks.
That's largely because AMC is a meme stock that doesn't behave as it should.
The high volatility levels in the stock cause it to trade with zero correlation to the theater chain's business fundamentals. And that keeps the stock trading in a dissimilar pattern to the APE units.
In addition, betting against AMC shares and going long APE has been complicated by high borrow fees for traders who want to open short positions in AMC.
JonesTrading's arbitrage expert, Cabot Henderson, said that if AMC wasn't so unpredictable, shorting the stock and going long APE would be a guaranteed successful trade.
"If you can get stable borrow [fees], it's a home run. But that's the problem," Henderson said.
According to the strategist, the risk of a short squeeze makes the arbitrage trade in AMC extremely unpredictable: "The real question for 'arbs' is about how to hedge these positions, given the potential for a massive short squeeze."
What to Do InsteadThere's no logical reason why APE units are lagging behind AMC stock.
Since the APE units were created in August 2022, they have not even come close to matching the share price of AMC's common shares.
The most natural thing would be for the prices of both equities to balance out sooner or later.
But because meme stocks defy market logic, shorting AMC can be a very risky trade.
Traders who wish to bet against the theater chain's shares must pay borrow fees of over 160%, which is very high. See below:
 Figure 2: AMC's borrowed shares.
Stocksera, data by Interactive Brokers
If AMC stock experiences any sharp upward movements in price — as we've seen with short squeezes — short sellers will be forced to cover their margins and lose money on these very high fees.
In theory, the safer strategy is to bet that the APEs will rise in price to match the common shares, rather than the opposite. Investors can do that by skipping a short position in AMC and just going long APE.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes) |
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| From: Don Green | 2/23/2023 8:16:11 AM | | | | | | Payment for Order Flow (PFOF) Explained
February 22, 2023 by Ziga Breznik
In recent years, the subject of payment for order flow, often known as PFOF, has garnered a significant amount of attention, notably in the aftermath of the scandal involving GameStop and Robinhood.
In this blog, we will be taking a deep dive into what payment for order flow is, how it operates, as well as the benefits and drawbacks of using this trading model for a retail customer.
In addition, we will go through the regulations governing PFOF, look at some real-world applications of it, and speculate about its potential stock market uses in the years to come.
What exactly is meant by “Payment for Order Flow”? In layman's terms, pay-for-order-flow, or PFOF, refers to the practice of brokers receiving payments from market makers in exchange for sending client orders to specific market makers. On the other hand, market makers earn money off the difference in price between a security's bid and ask price. This remuneration may come in the form of a percentage of the spread or a flat charge per share, depending on the agreement between the parties.
When a consumer uses a broker to place an order, the broker can either carry out the transaction themselves or forward the order to a market maker.
In the second scenario, the market maker is the one who is responsible for paying the commission to the broker in exchange for the right to carry out the order. Afterward, the market maker either carries out the transaction themselves or forwards the order to another venue, such as a stock exchange.
The primary benefit of PFOF is that it enables brokers to offer commission-free trading to customers. Brokers can collect money from market makers while at the same time offering consumers with minimal or no commission costs because of the relationship between the two parties. On the other hand, market makers profit from a steady stream of order flow.
Pros and Cons of Using Payment for Order Flow PFOF, like any other kind of trading practice, has both its share of pros and cons. Let's have a look at some of the most important benefits and drawbacks of this option for retail traders.
ProsLow or No Commission Fees: The primary benefit of order flow payments is that it enables brokers to provide consumers with the option of zero commission trading. This presents a substantial opportunity for many traders, especially those who engage in frequent transactions or who work with very small amounts of money. Better Prices: Because market makers profit from the spread, they have an incentive to offer the best possible price for a security. This can result in better prices for customers than they might receive if their orders were executed by the broker itself. Improved Liquidity: PFOF may also be of use in increasing the market's overall liquidity. Market makers have the opportunity to earn a profit from the spread by buying and selling securities, an action that may contribute to the market's ability to sustain a healthy level of activity. Cons of PFOF Potential Conflicts of Interest: One of the most serious concerns when dealing with PFOF is that it has the ability to generate possible conflicts of interest for brokers. They may be encouraged to prefer one market maker over others since they are getting charged for taking orders to a certain market maker. Yet, doing so may not be in the best interest of the consumer because it is in the best interest of the market maker. Lower Transparency: PFOF may also have the effect of lessening the degree to which the market is transparent. Clients may not be aware of which market maker their order is being sent to or the remuneration that their broker is getting for directing that order in certain cases. Less Control Over Order Execution: When a customer places an order through a broker, they may have less control over how that order is executed than if they were executing it themselves. This can lead to potential slippage and other issues.Official Regulation PFOF is a heavily regulated practice in the United States. The Securities and Exchange Commission (SEC) requires brokers to disclose the compensation they receive for directing customer orders to market makers. The SEC also requires brokers to ensure that customer orders are executed at the best possible price, taking into account all available market information.
Recently, there have been calls for increased regulation of PFOF. Some critics argue that it creates potential conflicts of interest and reduces transparency in the market. Othershave proposed banning PFOF altogether, while others have suggested alternative models that would provide customers with more control over their orders.
In 2020, the SEC conducted a review of the practice of PFOF and released a report on its findings. The report highlighted the potential conflicts of interest associated with PFOF and recommended that the SEC take additional steps to increase transparency and ensure that brokers are acting in the best interest of their customers.
Examples of Payment for Order Flow in ActionMany popular brokers and market makers in the United States use PFOF. Some of the most well-known examples include Robinhood, TD Ameritrade, and Citadel Securities.
Robinhood is perhaps the most famous example of a broker that relies heavily on PFOF. The company has been criticized for prioritizing its relationships with market makers over the best interests of its customers. In 2021, Robinhood paid a $65 million settlement to the SEC for failing to properly disclose its use of PFOF and for other violations.
TD Ameritrade is another well-known broker that uses PFOF. The company has been criticized for not being transparent enough about how it routes customer orders and for potentially prioritizing certain market makers over others.
Citadel Securities is one of the largest market makers in the United States and is a major player in the PFOF space. The company has been accused of having too much influence over the market and has been the subject of investigations by regulators.
ConclusionPFOF is a complex and controversial practice that has both advantages and disadvantages. While it allows brokers to offer commission-free trading to customers and can help increase market liquidity, it can also create potential conflicts of interest and reduce transparency.
As the SEC continues to review the practice of PFOF, we will likely see increased regulation and potential changes to how brokers and market makers operate. While it is unclear what the future of PFOF will look like, it is clear that it will continue to be a topic of discussion and debate in the trading community.
Ziga Breznik is the owner and head of research at PublicFinanceInternational.org – he is an active investor in the forex, crypto and stock markets – he has seen trading platforms disappear along with his investments – especially during the “crypto boom”. Ziga learned the hard way that finding a reputable and trustworthy online brokerage is key to long-term success in the financial markets. He founded PublicFinanceInternational.org as a platform where he shares his research with one goal in mind: to provide unbiased and trustworthy online brokers reviews. |
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