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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (40938)	9/6/2005 2:34:30 PM
From: ild	Respond to of 110194

"Reuters is reporting that J.P. Morgan (JPM) is looking to unwind a losing position in Microsoft (MSFT). According to the story, JPM purchased options from MSFT employees related to MSFT's fall 2003 Options Exchange Program. Reuters reports that MSFT's relatively stable share price has led to losses on the options trade and related hedges that could be over $450 million." ----(www.minyanville.com - 9/2/05) Schaeffer's addendum: As John Succo further commented on the Minyanville site: "A very large loss in Morgan's MSFT trade could have occurred when the company paid their $3 special dividend. If JPM did not put language in their contract to adjust the strikes of the options for the present value amount of that dividend, the loss could be staggering. The number quoted probably is to a large degree attributable to that." John is probably right, but the fact remains that being long option premium has been a very difficult and painful proposition for a long time. Perhaps Morgan's action is the first step in a capitulation process by frustrated option holders - a process that could serve to depress option premiums even further in the short run, but one that could also be signaling the beginning of the end of the gravy train for the premium sellers. Bernie Schaeffer schaeffersresearch.com