why would you excercise if the put premium you paid is becoming an appreciating asset...the psychology of the put for insurance, is overshadowed by the put itself being a tradeable instrument...on oct 8, if i bought my put insurance on dell, say by buying a 45 strike price on the contract..with the stock at 41 in the morning...i looked smart...but when the stock closed @ 50+, and never looked back, the insurance seller put the premium in his pocket...
I just thought that some folks who, for example, bought Oct insurance puts with strikes of say, 55, 60, 65, would look at the situation with Dell at 41 and decide "I'm dumping my Dell shares", so they would exercise. But it sounds like this is rarely the case.
I'm trying to determine how often the puts get exercised so I can determine how conservative to be with the cash requirement. For example, if I knew that eg 25% of the time, puts were exercised early, I'd want to have close to a 100% cash reserve to cover my butt. But, it sounds like from your experience that early assignment rarely happens. I'm sure the CBOE has this data. I've been searching but can't find anything. |
