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Strategies & Market Trends : P&S and STO Death Blow's -- Ignore unavailable to you. Want to Upgrade?

To: exp who wrote (25030)	1/18/2003 3:18:27 PM
From: DebtBomb	Read Replies (1) \| Respond to of 30712

see it, believe it: vtoreport.com vtoreport.com

To: exp who wrote (25030)	1/18/2003 4:03:10 PM
From: mishedlo	Read Replies (1) \| Respond to of 30712

mishedlo, could you explain the statement "delta hedging short kicked in today"?.. do you mean that after qqq went below max pain and many puts came into money the boys shorted the market and bought more puts?.. by the statement "the boys are likely short and would welcome a chance to cover lower" do you mean that now that they are short they would like to see further continuation to the downside to profit more before we have a sustained bounce.. if so, is extra 1-2 days of downside likely?.. mish, i would greatly appreciate your explanation correcting my statements..TIA No, you seem confused. Da boys do not buy puts. Da boys sold puts. Hoping they would expire worthless. Da boys sold calls as well. Hoping they would expire worthless. Max Pain was QQQ 26 approx. Huge numbers of calls at 27 and huge numbers of puts at 26. In a sideways market one might expect to ping pong around those numbers. We did. Zillions in puts and calls expired worthless and or all time premium was sucked out of them. Delta hedging kicks in in one of two ways. Breakout above QQQ 27. In order to prevent mammoth losses on calls that were sold, da boys have to go long at 27, so as they do not lose anything on calls. This delta hedging forces prices up even higher. Same in reverse. We break QQQ 26 and da boys have to short. They do not lose anything an the break below 26 because they shorted the crap out of it. Now was that really delta hedging or just unwinding of positions that had delta hedged long earlier. I now believe it was the latter. IBM was hugely over max pain as was MSFT and CSCO. When bad news came out they just started selling the crap out of this stuff, unwinding a long hedge (and making out big big time). Same with MSFT. That undwinding of longs does not necessarily mean they are short now. I am backing off the delta hedge short call to say they may or may not be. Possibly they just unwound their positions. There was not a lot of max pain difference between 26 and 25, so there is uncertainty about how short if at all they ended. Contrast that with a situation that say MSFT was precisely at 55, max pain was at 55, and bad news comes out driving it even lower. Da boys at 55 were neither long or short. Now with each plunge, especially if it hypothetically broke 50 and fell to say 47, da boys would have to pile on more shorts to prevent losing $ to the PUTs at 50. Contrast that with the actual situation we saw. IBM max pain at 80. All they did was unwind their longs, and unwinding more as it fell thru 85. So... Looking at things now, I am not sure one way or the other, if there is a residual affect of delta hedging. We closed close enough to max pain across the board, there there is possibly no residual affect. If we gap up and run on tuesday, there was no hangover. If we gap down big, there was. M