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Strategies & Market Trends : Waiting for the big Kahuna
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To: Casaubon who wrote (81170)9/20/2008 4:30:24 PM
From: KeepItSimple5 Recommendations  Read Replies (1) of 94695
 
Casaubon,

I have never met someone who knows so little about how options actually work, but seems to think that they know so much.

Options and hedging are not a game to be played by children like you.

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In no way does this disrupt the quantity of shares that are in existence. Options are simply insurance policies bought and sold by counterparties. There is absolutely no need for an MM to short the underlying to "delta hedge" the position. You just need me and another guy wanting to take opposite sides of the trade. There's no need for market makers, no need for short sales of stock, and options provide a perfect mechanism for counterparties to hedge risk by betting on direction of price movement.
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