Here was a trade. Nikola Corp., the maybe-one-day-electric-truck-maker that went public via a blank-check merger last month, has a lot of warrants outstanding. Each warrant (ticker NKLAW) allows you to pay $11.50 to buy one share of Nikola common stock (ticker NKLA). The trade was:
Buy one warrant for $24.62.
Pay $11.50 to exercise the warrant and get a share of stock.
Sell the stock for $48.84.
You pay $24.62 + $11.50 = $36.12. You get $48.84. Your profit is $12.72. Pretty good, no?
Levine suggests this weird situation was a consequence of his(?) "boredom markets hypothesis":
For a while Nikola was one of the most popular stocks on Robinhood, the day-trading phone app; the warrants were not.
He lays out the best-case scenario for the savvy trader of Nikola. On the flip side, is the worst case scenario for the Robin Hood trader buying the stock last week at $48 and then seeing it drop to $38 on Monday?
For the record, it looks like NKLA is around $36 at the moment.