This is from 1/9/2004 Yahoo Finance: ....... Selling was most pronounced in transportation, basic material, and health care, and only intensified in the last hour of trading - when, according to Briefing.com sources, S&P sell programs triggered stops and a tier-1 firms placed puts... ...... Can somebody please decipher for me what tier-1 firms are and what kind of puts they might have purchased. I would guess tier-1 firms are Morgan Stanley, Golman Sachs etc... The puts mentioned can these be S&P Futures puts? Thanks, Chinook
By equity-derivative desks purchasing put options on stocks and indexes for customers, the traders and market-makers who SOLD those puts have to sell S&P futures in order to hedge themselves. This "hedging" by market-makers obviously put pressure on the S&P futures, triggering stop losses at yesterday's lows, and encouraging further selling.
Maybe the selling was a long squeeze and the real buying comes next week. Didn't think of that did ya! What they really do is squeeze it every which way and collect from the dumb money on both sides. Been working like that for , oh, 100 years?