bullet construction

Discussion in 'Trading' started by minmike, Feb 17, 2003.

  1. minmike


    I understand how bullets are used in order to get around up tick rules. But I was curious on how the bullets are actual provide. Are bullets just a long put and a short call of ATM options in the nearest exercise month?

    (Just looking for the exact composition of a bullet without sounding like i'm too novice and wasting peoples time.)
  2. LA ECHO

    LA ECHO ECHOtrade

    Long stock + short, unlisted, in the money put.

  3. I think you mean Long Stock + LONG deep in the money put.
  4. Long put, short call, long stock.
  5. That's a conversion.
  6. nitro


  7. Once again, Nitro has it right.

    Long Stock+Long put=bullet
  8. silk


    So how can someone create a bullet for $.02/share and make money.

    Obviously if i wanted to create my own bullet for the day it would cost me more than $.02/share. Because of spreads on options transactions.
  9. You make money by what the bullet offers you the ability to do: short on a downtick. Sell a stock going down, buy it back lower and make money, all with out worrying about uptick rule.
  10. silk


    I mean how does the firm who constructs the bullet able to make a profit when they only get 2 cents a share from the trader who buys the bullet for the day.

    Who are the counter parties in this transaction
    #10     Feb 17, 2003