My apologies to blackjack007. I realize now that the thread-starter mentioned the 90% probability in his initial post, but not thread title. Obviously the DNT did not satisfy that absurd requirement. My stat-vol projected a 50/100 probability based upon 18/100 market pricing; due to my bear-bias and utilizing atm implieds over the Mar skew.
Typo, otm implieds. I priced the fairval based upon the proximal strike-vol [1600], and not the prevailing DNT March smile valuation.
Question. Regarding the shorting of BSC. Was there unusual option activity? I always had the impression options would be the prefered route rather than a direct short sell. I haven't seen any mention of options in the news, if there was an orchestrated bear raid, it would include options. Accusations are directed at sophisticated traders. Comments?
When? The last close above 30 reflected tremendous implied vol. The April 30 straddle was trading $18 at ~230 vol.
"When?" If the accusations are short sellers brought down the stock, I would assume they had a specific time frame in mind, perhaps within several trading days before the announcement. There should be accompanying higher open interest that may correlate to naked shorting from the option mm. I know it sounds like I'm begging and should have been checking it out myself, but I thought the short issue comments would blow over. tia
As Bear Stearns collapsed late last month, a significant rise in options Put contracts exploded into the market. The short sale negativity in the options market carried over to the equity market through use of the market making exemption. Soon all buy-side demand in the equity market evaporated under the pressure of teh options market hedging taking place. Settlement failures in the equity exploded as the market collapsed. Many believe that the unusual rise in the options trading was a sign that investors knew an event was to take place before the actual fall and traded on the news. The red flag in trading was the level in which these bets were being placed as a large quantity of contracts were purchased well out of the money requiring a very small purchase premium but also required a better than 50% market drop in a matter of days. What we have now come to learn is that rumors were being disseminated throughout the market trading desks discussing the availability of capital at Bear Stearns. The rumors, false at the time they initiated, created the event necessary for the options contracts to become significant in the money contracts. ------------------- Above from Patch. Anyone confirm, does this sound about right?
its not too high, there only going to take it higher just look at the price action and follow it, targets for me are 42-82