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Hello Ira,
IT> If it was a fund he could very well have been selling out the money calls against
IT> stock positions. He probably would have used a volatility study, standard
IT> deviation or other momentum variable to find the options to sell.
yes, it may be interesting to note that this hedge fund who has 90% in
stocks can only have 10% in futures - however the futures trades made
90% of the money.
IT> He probably did
IT> not ratio write and therefore remained delta long throughout the bull market. In
IT> the event he was looking to add to a position, he could have sold puts. If he
IT> didn't get the stock, he at least got the premium. This would enhance return and
IT> if the stocks were called away there were plenty of others to go to or he could
IT> repurchase those same stocks on a retracement. He could even sell at the money or
IT> slightly in the money puts looking to acquire stock and pocket the premium above
IT> the intrinsic value. There are many ways to sell premium and not have unlimited
IT> risk.
i see you are in fact experienced great - a real trader.
IT> the biggest benefit he had is that he earned a fee for the money he managed
IT> and participated in the profits on other peoples money. All supposition, Ira.
though many may not like this - we all need to be paid - especially if
we do a good job. professional money managers have one of the
hardest professions i know of. its sad to see the general public make
light of the efforts put forth by them. johnny worker buys his
computer and his data feed and dreams he's a trader who will set the
world on fire. all because he has come home each night and sat down
to see what he would have should have and could have done.
--
Best regards,
Research mailto:research@xxxxxxxxxxxxx
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