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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Cynic 2005 who wrote (88787)4/2/2001 4:36:08 PM
From: Just_Observing  Read Replies (2) of 436258
 
if you'd read the latest 10q or have listened to the cc you would know that they are BUYING back stock and hedging the puts.

When you have sold naked puts (a bullish bet), you cannot hedge it with another bullish move such as buying the stock. If you indulge in buying stock then you just increase the pain when the stock goes down. But if you are big and rich enough, you may consider supporting the stock by buying until the time value of the puts goes to zero. But this is a dangerous strategy since you may run out of money and then you have set yourself for an accelerated decline (puts and stock, both working against you).

You can hedge a bullish bet with a bearish bet such as selling naked calls or shorting stock. Are companies allowed to short their own stock? Or sell naked calls on their stock?
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