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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: Carl R. who wrote (63934)	5/8/2002 3:39:36 PM
From: mishedlo	Read Replies (4) \| Respond to of 99280

Sort of but not exactly. Place me in the camp that said the powers that be went short MSFT when it cracked 55. As it kept sinking they did not care all that much if it kept going lower. If anything they wanted it to go lower (to cover at the bottom and go long on the right set of circumstances). A gap down of 8 points today would not have bothered them in the slightest(in that it would not have cost them anything as they were already hedged to cover the short side). Same On CSCO. However they make the most money if Max Pain is hit. So at the first sign of good news they unwind the shorts and push it back up (unwinding of the hedge). A gap up today (within reason e.g. as long as it was below their short price) would not have hurt them either. These gap ups today were NOT because of unwinding. The CONTINUATION of the gap up was due to unwinding. The gap up or down only hurts if there was no hedge and we sitting right on Max Pain. Right on pain there would be no reason for them to be long or short. We hardly ever see a big gap up or down this close to expiry do we (with a stock sitting exactly on pain). In this case we were below and a gap up towards pain was likely. No way was I gonna hold short overnight in front of possible good news. Now, perhaps da boys knew full well what CSCO was gonna report and had already covered at the bottom, but technically (from a hedging standpoint) unwinding a hedge before news hits would be a silly thing to do (unless the result was pre-determined and that would not surprise me a bit). M