Dude, we never finished our BBG discussion on "what things are cheap and convex and will help you if the world blows up"...
This thread is about OTM puts. May be the gurus here can shed some light on this activity. I saw SPX JulWk2 (07/88) 1025P and 1050P traded 1000 contracts each at the same time within one minute around 4:12. A few minutes before option closing. That is approx. 3000 Dow points away for 3 holidays/Wkend days + 4 trading days. What is going on with this kind of trade? What are the buyers trying to protect. Thanks, Frank
I figure that if I am going to make a career in the market, I have a few choices. I can trade unleveraged, I can trade with leverage and be lucky, or I can hedge leveraged positions with options. A disaster stop works and is cheaper than options in every trade except for the one that ends a career. That's the real benefit; it's guaranteed execution at the exact moment when I NEED execution. Who cares if there aren't bids in the options market at the time? It's a contract and it will be honored when I call up to execute it.
They could be sellers buying them back. They might buy them back if they thought they weren't decaying fast enough in value or they might be concerned the volatility will rise. So, they took this time to lock in profits.
Selling options is way better than buying them. Time value decay works against you as the buyer. Who likes being right on the market but making little, nothing, or losing because of time value decay?