Wednesday action - arbs protecting naked puts?

Discussion in 'Options' started by Choad, Oct 20, 2005.

  1. Choad


    Interesting blurb from Jeff Cooper on Real Money:

    "The big arbs unleashed buy programs Wednesday to keep naked puts from exploding in their faces."

    I let my RM sub go a few years ago so I can't read the rest (I'm a cheap f*cker...), but what do you guys think of this supposition? Is Coop FOS?

    Any of you pro's have comments you can post? Anything tradable for the retail guy (max pain theory?)?


  2. i read it. looks like pure speculation to me.

    Finally, as you know, it is options expiration week, and as we stated yesterday, anything can happen. Anything happened on Wednesday. Why? I believe that a key factor in Wednesday's rally was that the big arbs unleashed buy programs to keep naked puts from exploding in their faces.
    Moreover, the big Boyz love to play Pin the Tail on the options donkey going into expiration. With puts on the S&P ballooning this month and with calls on the 1200 strike on the index shrinking to a fraction for Friday's expiration, the S&P kissed the 1170 strike and was jammed toward the 1200 strike within a few hours going into the bell. The S&P settled at 1195.75. What a swing.

    The moral of the story is that there are few choir boys on Wall Street. It is a lot easier and there is a lot more money to be made by taking a call at a fraction to one or two dollars for a 1,000% gain in a day or two than it is to invest in a $50 stock and ride it to $60 for a 20% gain over a month. You do the math and figure out what the monthly Pin the Tail on donkey options expiration game plays out to on an annual basis.
  3. Choad


    Thanks vhehn.

    Cooper can sometimes come up with some crazy stuff, but I know a lot of people follow him.

    His theory about the Wednesday spike seems to follow along on that article that Nitro, I think, posted about how the big boyz push around stocks to defend their op trades.