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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: energyplay who wrote (9380)	10/11/2001 3:06:25 PM
From: energyplay	Read Replies (1) \| Respond to of 23153

More on the put set up from Jim Cramer - >>>This is why I pay TheStreet.com 19.95 a month <<< Put Protection Supports the Long Side By James J. Cramer 10/11/2001 02:58 PM EDT URL: thestreet.com Jay's right. But it is even more insidious for those who are short than Jay lets on. I come from the hedge fund community. I can almost sense what the community has on its sheets from my 15 years in the game -- and believe me, I was a huge student of the game. Hedge fund managers most likely have boatloads of October puts that they put on, either because they expected another attack, or because they figured earnings were bad. They might have put them on because they thought that when the war started we would go down. (There were many people who felt that way before the Iraqi war, too.) Maybe they had them on because they thought Bush was a bumbler. Bad bet. Now those puts are rocket fuel. Let's stick with the IBM (IBM:NYSE - news - commentary) example that I talked about earlier. You own the October 95 puts. You figure IBM is going to preannounce to the downside. You get the number cut from Goldman yesterday and you are joyous. But the stock never really goes below $95. And the puts never pump to where you can make any money because you bought them when they were expensive, say $3.00, where they were last week. Now those puts are at $1.60. What do you do? If you were me, you would say, "I need the upside. Buy me some IBM against those puts." If I had 1,000 puts, I would probably buy 75,000 IBM -- I wouldn't buy it all because if the company did break in with a shortfall I would be crushed. That buy of IBM is going on all over the Street. Next thing you know, IBM has upward momentum. Then the same thing plays out at the $100 strike! Puts are ammo. They allow you to fire away at longs all day and be protected. They make you bullish. They create a reason to get long. That, in itself, when it happens en masse, can cause huge upward pressure on the market. It is why, again, I think any selloff between now and Oct. 19, when expirations expire, will be contained. And buyable.