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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Casaubon who wrote (81170)	9/20/2008 1:06:22 PM
From: Real Man	Respond to of 94695

Theoretically, yes. In practice, no. There are also lots of arbs in the market to take risk free positions between derivatives and cash. That's who the MM really are - the arbs, who take advantage of mispriced risk free opportunities automatically. Without them the markets disconnect and chaos prevails. Without the arbs the markets become illiquid, i.e., for example, the markets are crashing and you want to buy a put, but there is nobody who wants to sell you one. -g-

To: Casaubon who wrote (81170)	9/20/2008 4:30:24 PM
From: KeepItSimple	5 Recommendations Read Replies (1) \| Respond to of 94695

Casaubon, I have never met someone who knows so little about how options actually work, but seems to think that they know so much. Options and hedging are not a game to be played by children like you. --------------------------- In no way does this disrupt the quantity of shares that are in existence. Options are simply insurance policies bought and sold by counterparties. There is absolutely no need for an MM to short the underlying to "delta hedge" the position. You just need me and another guy wanting to take opposite sides of the trade. There's no need for market makers, no need for short sales of stock, and options provide a perfect mechanism for counterparties to hedge risk by betting on direction of price movement.