Anyone care to comment on the mechanics of how something like this is pulled off - http://blogs.wsj.com/marketbeat/201...ar-expects-stocks-rally-to-snap/?mod=yahoo_hs Per Yahoo April 14 Puts Vol 78,419 OI 511 Day's Range .50 - .81 Previous close - .67 Open .57 Amazingly Horton was up .57 to 14.56 May 14 puts also much higher vol. What are the mechanics of buying 78,000 options in small batches? Who is the seller?? Will be interesting to watch.
According to the story there will be some housing data coming out before the April expiry. To make it easier to follow below is a link to D.R. Horton, Inc. (DHI) quotes. DHI @ $14.56 DHI April Option Chain DHI Apr 2012 14.00 puts @ $0.52
I can't see why a hedgie would decided to pull in a single strike like that just to play the news. This feels much more like a market-maker trying to get himself clean vs an OTC trade that he's done or (just as probable) some sort of corporate trade, maybe some sort of repurchase facility or something. In any case, I am too tired to dig into it right now, but I'd look at the edgar filings and news headings.
My real question is not why someone is doing this but rather how? If you take the OI about 500 as average, how does someone get someone else to write 78,000 puts? And although the option price did go up, it seems that from just basic supply and demand that the price of the puts would have went up by more? Then there is the selling. When they get ready to sell 78,000 into an average of 500, seems like you would get screwed? Only good explanation is that the options are going to be exercised. Anyone will watch.