oilman and I are having a back and forth in another thread regarding the latest round of put option purchases in Hun. What does everyone think here? Are they a straight bet against the equity, or are they insurance purchased by a large holder of the common?
i think it's something like this: there are those HUGE funds (fidelity, whoever) using high-powered HFTs and computers to help run their massive holdings. So they have an internal formula (number) for THEIR firm's various funds they manage, an internal number (ROI, whatever) they have to meet.
add in different funds within a firm have different targets --
Regardless of "name" (and perhaps even sector) of any publicly held Corporation listed, any huge fund manager's set of statistics inherent to managing their own risk model and strategy will need to be met using all kinds of buying of puts, options, whatever-I don't keep up with all that -- that they'll buy or sell to plug the holes in their model to build their model for huge moneyed fund. ETFs probably do this a lot I would suppose...
I don't think it's a dude doing it -- and don't even think insurance v. bullish v. bearish has much to do with it. I certainly don't believe "option monkey" can provide me any relevant insights on this action in the market but do appreciate their tweet level burps of "heh this happened" and give it only that much credence.
Do think it's more plugging a technical gap in a much larger strategy regardless of bull bear leaning or love/hate long/short whatever attitude toward any particular firm.
it's all just simple numbers. and the dynamic of various large money firms' opinions of which way they think things will culminate -- add in short/mid/long term mindsets - ya got a fun party going on here.
I'm certain some degree of review is done on financials of any particular corp prior to buying anything (short, long, puts, options) from that publicly held corp - perhaps some macro or geopolitical weighting, national GDP anticipations, commodity (ie, mineral, fuel, food demands/expectations, etc.) --- to fill this small gap in any large fund's portfolio.
But I'm just not convinced it's personal really. Just another burp on an almost too massively active market to try to personalize any particular action at this dollar or volume level.
never looked: what percentage of outstanding shares would this option equate to? if it's less than 1% -- why would anyone spend time worrying or gettin' his knickers in a wad over it? and if it's a miniscule percentage amount, why would someone listen to an "option monkey's" opinion about the matter - since it's probably a "paid content advertising" message anyway?
I think your general perception that this is a manufactured trade designed to get more yield out of a HUN investment is true. I know that's not what you stated and you are laying off much of the action to computer models and etc. but elements of that would go into this particular trade.
Nobody (here at least - esp. sl1ck, it seems) was willing to do ANY amount of research on what SELLING puts actually signifies - why a LONG would do it, generating vig, etc. - and to do so would basically provide the necessary explanation since I guess nobody seems to believe what I've been posting.
I'd say "the fact is that..." but will instead say "the evidence presented clearly suggests that" a large HUN holder who wants to stay long and - by default - IS BULLISH decided to write some medium short-term (5 month) put options and sell them to somebody in order to generate about $400,000.00 of premium. Is it a lot relative to a 2MM share HUN holding (or roughly $36MM holding)? No, but it's in excess of 1.00% and is significant.
The buyer could very well have been an associated long. But - as any diligent researcher on the subject would find - PUT options in particular are a much sought after commodity by banks/hedgies as needed window-dressing for their portfolios.
Last - and relevantly - Berkshire Hathaway is famous/notorious for selling puts against their holdings in order to do exactly what I have pointed out - generate more investment return. 1.00+% on a shortterm deal is not insignificant for parked stock.
If anybody wants to actually learn more about what actually happened here, I'd suggest to simply google something like "selling put options to generate investment return Berkshire Hathaway" or "strong demand for put options seller" etc.
Later... Please check my next unrelated post question. Would love some feedback ideas on this...
steri: Without the crude reference, we all know that "opinions are like...."
But really, what are you trying to prove? Your HUN put trade "protection" assumption CANNOT be proven. It's left up to logical and rational personal opinion based on the trading data. As stated numerous times, I think the trade was obviously a bearish bet by an outright put buyer, not a big holder buying "protection".
But let's get the crux of your attempt at a "poll". What's left on this board is the Merry Band of HUN Groupie pumpers waiting for the glory of the "end game". HBWT was the last of the rational and objective commentators and he has been banished from the board for life.
So, what are you hoping to get out of your "poll"?? Hopefully, not some instant gratification that you are "right"!! Because there simply is no empirical evidence to logically support your "opinion".
It doesn't matter if we think it is one or the other. What the source of contention is whether it is bullish or bearish.
My vote is for Da' Bears.
My personal opinion is it is not protection because the premium is so small relative to the assumed amount of shares owned. It offers a fraction of protection. It just doesn't add up.