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It's a bull hedge here's why............I buy 1600 puts at 21 - 21 1/2 a support area plus maybe I've heard something, it cost me $700,000...All I can loose is 700,000 if the stock stays under 25 by the 3RD week in April(when are earnings).I then buy 700,000 shares of stock..remmber we had heavy volume for a couple of days after the puts were bought...now everytime the stock goes up a point I make $700,000 its up at least two, $1,400,000 my puts have lost 1/2 350,000 so I,m plus 1 million. I do this because I really know something ( GOOD NEWS COMING I.E. HEAVY TRADING IN THE FUTURE, which will let me unload 700,000 shares easily)but I hedge it...my downside is covered by the puts where I can only loose $700,000 my upside is real good if the stock goes back to 27 I ve made 4-6million( my initial investment plus puts 15 million) I then sell the shares that puts pressure on the market that drives down the stock that makes the puts rise...of course I could have bought more puts before dumping the share thus the stock could only have to go back down to around 24 for me to recoup my initial 700,000. I'm betting on good news.... Now who would sell me 1600 puts....any guesses? |
