Formerly About Applied Materials Message Board

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Politics : Formerly About Applied Materials

AMAT 226.05

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3:59 PM EST

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To: Jacob Snyder who wrote (24883)	10/5/1998 8:47:00 PM
From: Berk	Read Replies (2) of 70976

Jacob, your are most likely incorrect on your statement that the MM is unhedged on 94 options. Every option has a delta which to oversimplify is its value in terms of shares of stock. Once the MM sold the LEAPS to you he most likely hedged himself by buying the equivalent number of shares of stock or undervalued options (based upon his perception of volatility) since his sale of calls to you made him short the stock. The exception would be if he wanted to take the risk and stay short. Delta by the way varies with price and other factors, the closer to the strike the more closely the delta approaches one. By the way many posts ago I asked if you were hedged, meaning that you could pick up premium offset in calls that would expire prior to your LEAPS (called a time spread) which will lose time value.

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