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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Henry Volquardsen who wrote (7152)	10/16/1998 12:08:00 PM
From: Paul Berliner	Read Replies (1) \| Respond to of 9980

An options tale from yesterday & a warning of another credit crunch......... the early bird doesn't always get the worm: I always periodically flick during the day to a live dow chart at fast.quote.com So at 3:30 yesterday, I was wondering why the market was flying and switched to cnnfn.com where they mentioned the rate cut. I decided to wait until the Dow was up 200 before making my move. My mind was working fast, and knowing that the pac rim markets would surely rally tonight on this move, I saw a golden opportunity to make some quick Gs on some hot potato october calls. I flicked through option quotes on PHI, CHL, HIT, etc., but all their cheap 1 point out-of-the-money calls were already pounced on. Then I checked HKT (HK Telecom) which was just under 21. At 3:35, the ask was 1/16 on the Oct. 22.5 calls with no volume. Wow, I thought, the Hang Seng should rally sharply tonite and HKT should thus open up at least 1.5 points higher tomorrow. Thank you Mr. Greenspan. My pick was further backed by a story I read on bridge about how a HIBOR rate cut was anticipated soon since the HK money market waters have calmed over the last month. The pick was solid. I called up my broker and was horrified to see someone beat me to the options, purchasing 100 calls at 1/16 to 1/8 while I was dialing. I stomached the bad luck and got my own order filled at 1/4 (which sucks) as the market maker for the option filled my market order a good 5 minutes after it went in, meaning he didn't give me the best price, but I can't blame him), but HKT was ticking up every second, eventually closing in the high 21's. I hoped for the best. Last night at around 11, I saw on bloomberg TV that HK was up 8%. I had scored... or so I thought. I get in today and HKT opens lower. And it sits now at 21. A similar situation happened with PHI a few months back. The volume is low today in HKT so the market maker for the options can sell HKT inventory that he has (which he probably picked up in July for $17) thus keeping me and the 100 call party from enjoying a nice weekend. I have yet to make any good money on calls or puts purchased the day before expiration (which always seems to good to be true because there's no premium left). Also, CAT threw up on its shoes today but my Oct. puts purchased a week ago will expire worthless because of the rally yesterday that pushed CAT up 2. On monday. they'll be downgraded and fall to the low 40's. DAMN. Regarding the credit crunch, AG is only exacerbating it with the rate cut. Just remember how last week all the mortgage REITS and consumer finance subprime lenders were plummetting because their portfolios are bid at lower & lower quotes each day, subjecting them to margin calls from the same banks that securitized this crapola for 'em. Now you'll just have more bankruptcies because BBB and below rated stuff is getting bullshit bids. Smart move AG. This will cause another handful of repsected Cos. like CRIIMI and countless hedge funds to fold. This is a credit crunch. It is happening as we speak. And soon it'll trickle up from the junk bonds to the investment grade stuff.