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Strategies & Market Trends : Zeev's Turnips - No Politics
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To: Zeev Hed who wrote (73564)6/2/2002 5:48:05 AM
From: Steve Lee  Read Replies (1) of 99280
 
1) J6P buys a QQQ put from JPM. Neither party is hedged

2) QQQ goes down enough to let the put go ITM

3) JPM unwinds by shorting QQQ. That would put some downward pressure on QQQ. (JPM could unwind by buying a put. In that case to keep all else equal we assume that the seller of that put is hedged with short QQQ).

4) At expiry, J6P (or someone he sells the put to) buys QQQ and puts them to JPM. That creates buying pressure equal to the selling pressure from JPM's unwinding.

JPM is left with some QQQ that they may or may not want, but they are still short an equal amount from step 3 above. So where is the selling pressure from unwinding?
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