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Technology Stocks : PSFT - 1997 Outlook [closed thread] -- Ignore unavailable to you. Want to Upgrade?

To: Skeeter Bug who wrote (523)11/11/1997 4:34:00 AM
From: Bilow  Respond to of 940
 
Hi Skeet. Re puts effectively being short sales.

I buy puts from the market maker. He hedges by short selling.
The ratio he uses is called the "delta." The delta is how many
dollars the put changes in value for a one dollar change in the
underlying security. (More or less.) Consequently, if the delta
is 0.3, and I buy 80 puts, he has to short sell 0.3 * 80 * 100 =
2400 shares.

-- Carl


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