Anthony @ Equity Investigations, Dear Anthony, Message Board

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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony,

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To: anniebonny who wrote (100231)	8/25/2007 7:22:26 PM
From: Kevin Podsiadlik	Read Replies (1) of 122087

Actually it's not even as complicated as that. If you sell an SPX.X 700 call for $750 you are effectively going short the S&P index at $1450. The only difference is you're collecting $750 of that $1450 per share now and the remaining $700 at expiration. So if you're able to cover that short anywhere below $1450, either before expiration or after, you make a profit. The article writer seems to think that if the calls don't expire worthless or near worthless, i.e. the S&P remains substantially above 700 through 9/21, the call sellers lose. That's simply not so. The call sellers will simply have to buy to close out the position, and they've got $1450 per share (times 6.5 million shares = $9.4 billion) in cash from the two halves of the transaction to do it with. I think they'll manage! That's not even getting into how the call sellers can and in all likelihood have long since fully hedged those options with long positions in S&P listed companies. One other inconvenient fact for the conspiracy nuts, and that's that there are similarly outsized call and put positions at the other price extreme for September options, at 1700. So, using the reverse of the logic in the article, there must likewise be some secret plan in the works to dramatically increase prices in the stock market over the next four weeks.

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