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>GB, tell us when you are going to sell some of those high implied
volatility
>puts in the next 8 days.
Bob
I think that opportunity came on Friday, Nov 5, 1999 and passed us by on
Mon/Tue Nov 8-9, 1999.
Softee now seems to be melting in a steady downtrend, with similar ducks not
yet lining up - esp with front month expiration now a full four weeks away
and new Judgement Day only one week away.
This time around the implied just may stay high enough 2-3 days away from
expiration - too long a pregnant pause for my taste, esp in this kind of a
market where we're - for example - learning that Yes Virginia, Stocks Also
Come Down <g>
In the "file it away for future lasso practice" dept, here's a trade recap
from the ol' cowboy diary:
Fri 11/5 MSFT trading around $90.
- Judge Jackson to announce Finding of Fact after market close on a Friday.
- 10,000 lot trades crossing the screen on MSFT 2 weeker puts (note to Bob:
These were Nov 99 expiration 85, 90 and 95 strike puts with MSFT trading
$90-$92) This went on all day with (I think) Goldman or JP Morgan crossing
the trades first thing and going on into a few minutes before the bell).
Maybe the Doc will fill us in.
- Some 60,000 contracts traded on that day against avg volume of 20,000
contracts.
- Implied vols at trade price = mid 80's.
Wow. Fear is the key.
Now there was heavy overhead resistance in open interest in the 90 and 95
calls (40k lots each strike open interest), and the put buyers were really
late to the party. I mean, why bother to buy earthquake insurance once the
earthquake is a known certainty??
I guess it must be all those institutions with a cost basis of 25 cents on
long stock hedging against some huge drop. Whatever.
I legged into a short 90 straddle for $10, against an existing long 95s call
position and capital to take stock at $80 should the need arise, in 2 weeks.
Monday 11/8: Msft traded down to $84 before going back to high $80's.
Tuesday 11/9: Bought back $90 straddle for $5, and rode the 95 calls into
the expiration sunset.
In the Heard On The Ranch dept, an Old Jungle Saying: Volatility reverts to
mean.
Gitanshu
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