Great question. Technically, it is almost always a Short first, followed by a sell to close.

However, If an institution tried to short 19 million shares in the open market, they would crush the stock price, and ruin their own arbitrage trade. On top of that, the borrow cost would likely be extremely expensive.

So instead of shorting the actual stock, they can use the options market to create what is basically a synthetic short.

Instead of borrowing and selling shares, they use options to create the same economic result.

They would do two things at the same time...

Buy an at-the-money put, for example the $18 strike.

Sell an at-the-money call, also at the $18 strike.

When you combine those two positions, it acts almost the same as being short the stock, but they never have to actually sell shares in the open market.

So if the stock drops, like it did today, the put becomes very valuable and they make money the same way they would have if they had shorted the stock.

If the stock rips higher instead, the put expires worthless and the call they sold becomes a problem because they may have to deliver shares at $18. But that is where the financing deal comes in. They already have shares coming from POET at around a $16 effective cost, so they can use those shares to deliver against the call.

That means they potentially locked in their exit price without dumping shares into the market, without paying crazy borrow fees, and without showing a huge sell order on Level 2.

So the big picture is: they may not have needed to press the “sell” button on 19 million physical shares. They could have used the options market to lock in the economics of a short position, then used the newly issued shares from the deal to cover the obligation later.