D.J., RE: When Dell "sells" puts on their own stock, someone "buys", or underwrites those puts. Both Goldman Sachs and Bear Stearns were mentioned, by Dell, as the largest underwriters of the puts Dell purchased above $40 when the trade occurred. When one particular trade occurred it was reported, at that time, as being one of the "largest option trades" in the history of the market by a corporation.
Conspiracy or no, someone benefits, someone loses.
Without question, Wall Street benefits from Dell taking on a very large option position to hedge the necessary share buybacks. They get a fee from Dell and the entire risk of the options are easily hedged away so that they have zero exposure to the movement in Dell stock.
If you believe that this is a zero sum game, as your last sentence suggests, then the only loser that I can think of is the shareholder. Do I take it, then, that you don't believe Dell management when they say that the option program is a benefit to shareholders? |
