Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (88684)	1/21/2001 1:51:42 PM
From: Mark Adams	Read Replies (1) \| Respond to of 132070

This guy is dangerous. Perhaps he doesn't understand delta hedging. Anyone who deals in that size certainly does. EMC Put Option Seller Playing for a Rally By Brian Louis {deleted} Apparently, a customer sold in the neighborhood of 17,000 in-the-money EMC February 90 puts yesterday, arguably a deeply bullish move. EMC added 88 cents, rising to $76.88 on Friday. By selling the February 90 puts, the investor is betting that by Feb. 16, when these options expire, EMC will be trading above $90. More likely, some big fund bought the puts to protect an existing position, or bet on a future fall in EMC, IMO. There are two sides to the trade, and two sides to the coin on each side of the trade. Therefore, the investor won't have to buy the stock from whomever the puts were sold to. While put buyers are typically seen as bears, put sellers take in a premium against the risk of the stock's falling and having to purchase shares at the strike price ($90 in this case) to fulfill the contract's exercise. That makes the basic strategy of a put sale bullish, because the seller profits from the stock's rising, or sitting still because the options expire worthless. Put selling is among the riskiest strategies in options trading Naked puts have a limited risk- the stock can only go to zero. Naked calls potentially have an infinite risk. I'd say Naked puts entail much less risk than naked calls. The seller of the puts likely shorted enough EMC to offset the risk of EMC being put to him. Or hedged via other option positions in the same stock. Delta hedging. because it can saddle a trader with an obligation to buy a losing stock position. It's just my opinion, but people should avoid listening to such *rap.