Moving large blocks

Discussion in 'Strategy Development' started by garfangle, Nov 17, 2003.

  1. Would this work to mitigate the costs on trading a large block (>250K shares) of stock? Before you actually place the order (in this case, a buy) you trade in their options either/or/both through buying a call or writing a put (bullish bets). Because you know that your actual equity purchase will move the stock upward and you will have to buy at the higher prices, by using the option strategy the effect would be to make money off the demand pressure caused by your purchases.

    Example:

    XYZ stock is trading at $25.
    You're interested in purchasing 700K shares.
    You know that your buying will move the stock up $2.00.
    Beforehand you buy call options @ $25 strike for $.40 and/or write put options and receive $.30.

    Then when you actually make the trade and the stock moves up to $27, you offset the higher price by clearing $1.60 for the calls and $.30 for the puts.

    This can be done similiarly for selling through writing calls and buying puts.
     
  2. Htrader

    Htrader Guest

    problem with this is that you'd never be able to buy/sell enough contracts without moving the underlying stock yourself thus defeating the purpose.
     
  3. =====
    Mr Goldman at ''yamner.com'' frequently writes about that subject;
    important part of thier business.

    Interesting an email earlier this year involved waiting until last hour;
    unfortunately , price spiked - the trade had to be done.

    Good thing its a bull market.

    ===

    Love learning: Solomon, trader king cool: