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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: John Pitera who wrote (9886)8/10/2000 9:50:07 AM
From: LLCF  Read Replies (1) of 436258
 
<when the 56,000 puts were written by GS, or MSDW or MER
they immediately went into the market and shorted stock
to limit their exposure, or maybe shorted a ratio of stocks
and sold off puts that they had built up or that another
client wanted to sell.>

I'm not privy to the trade so I don't know who originated it... but remember, it is certainly possible that the 'originater' of the trade may not do ANYTHING to hedge... he just wants the position. For example, a fund with a boat load of CSCO may buy 10,000 puts for insurance with NO hedge on the other side. The MM's or house that facilitates the trade will, of course hedge [short the stock], but in this case there is no 'buyer of stock' as it plumets, in fact there is continued selling by the folks short the puts.

DAK
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