As mentioned in the paper, last Thursday someone bought 12,000 Jan 08 25, sold 24,000 15's, bought 12k 2.5. Any opinions?
non-directional play with bias on downside (if body were sold calls), hope pinned on vols decay, ? gains and some protection in any event.
meant theta gains, but im not allowed to type in greek on this site and the '?' key corresponded to theta (editing time elapsed) on second thought looks like he wants the stock to die (again if he's long the wings and short calls on the body)
He wants it to go down but not die. It was probably put on at no credit or debit, but because he bought the 2.5 instead of the 5's his max loss is 2.5X12k=3,000,000 if it goes below 5. Stays profitable from ~3.5 to 30, I kind of like that bet.
The ad rotating above me as I read this thread says only Option Vue 5 has the variable volitility model. I thought riskarb had all the models and a few b-girls too.
Why are people saying he wants this to go down? If you fly a position, you are making the most money on your shorts and if you're short the guts you want the stock to expire at 15. Am I retarded in thinking that your downside bias is wrong?
The best case on any long natural fly is a close at the body strike. He's skewed somewhat by his choice of 2.5 on the wing strike protection. He's neutral at $16 and change, but I haven't modeled it. Position is neutral and best case PnL at $15 at expiration. Stock is at $20, so it's a downside bias. Your statements are contradictory.
Riskarb, why would someone betting so big and in an obvious way? Wouldn't there be other forces trying to trade against this bet? And why wouldn't he do it in batches, so it would not be so obvious? May be he is doing something besides this butterfly??