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Technology Stocks : Zenith - One and Only
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To: Scott Lerner who wrote (3662)12/16/1997 4:43:00 PM
From: Scott Lerner  Read Replies (2) of 6570
 
3:08pm Dow News Wire Confirms Bull Option Hedge on ZE.

Option trader buys Feb 7 1/2 calls and sells ZE short to hedge. This is a Delta Neutral strategy. The trader obviously is long the calls and sells maybe 25-30% short as insurance. In this case, the trader bought about 2000 contracts (this is the equivalent of 200,000 shares), he simultaneously sells ZE short. The amount he shorts is based on the options Delta (the volatility rating). Based on the Delta, maybe he shorted 30% of the long side or about 60,000 shares. This is a bull hedge. He is hoping for really big stuff by February, but he has hedged (insured) his long options by shorting.

I see this as a big positive on two fronts:

1) Trader likes ZE enough to put this hedge on

2) Trader may cover short on the way up, fueling the ride.

Gee, I'm getting kind of good at this. BTW, We've added at least another 25,000 shares to our position.

Let's hope for another good one tomorrow.

Scott
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