Daffy wrote a long silly manifesto attempting to show that the recent HUN put trade was in fact "bullish". Yeah, when pigs fly!!
It's nothing but truly asinine foolishness. Bottom line, the BUYER of the puts was obviously "bearish" on HUN. The SELLER of the puts could be bullish, neutral or even bearish on HUN. It doesn't really matter because the seller simply believed that HUN would never tank all the way to $12 so he simply pocketed the proceeds. (BTW -- The puts could have been sold NAKED!!) It's also laughable that $12 puts would constitute "insurance".
If the Merry Band of HUN Groupies buys into the Daffy nonsense, you're all hopelessly DAFT too!! I guess ignorance is bliss among the HUN faithful!!
BTW -- How ironic that HBWT -- the guy who should be FOREVER banished from the board -- is the only poster who understands that the put trade was NOT bullish or even insurance!!
||It's also laughable that $12 puts would constitute "insurance".||
Why? I think the more you talk through the issue the closer you are getting that possibility. Just because you so it is, does not advance the case as to why it is.
You are still binary - either bearish or bullish as if it was a straight bet. If someone with 2 million shares wanted some downside protection between mid-January and mid-May, and did not want to sell them, why not buy straight long puts very cheaply, that will only get even (relatively) cheaper if the price of the equity does trend down?
After the ludicrous August '11 downdraft for a penny hiccup, and with a potential suitor rumored about, it might not be a bad idea.
I may scratch my head over deft's writing the put to sell to yourself, but I can agree with his raising of insurance as a possible motive.
"I may scratch my head over deft's writing the put to sell to yourself, but I can agree with his raising of insurance as a possible motive."
It's not the only scenario but one that seems to make the most sense. If you are already LONG a sizeable position in any stock (2MM shares is pretty damn long!) then WRITING (meaning, attempting to SELL) a put option gives you a measure of insurance. You don't really want the stock to go down. You want to pocket the premium. It's easy money. Even if the stock goes down (in this case let's say from $18 to - oh, whaddaya say? - $15) you get to pocket the premium and get a boost in value from your long position.
Really in this case, as I tried to explicate, the BIGGEST question is what SUPER BEAR M O R O N (BTW, YHOO turned my use of the word "moron" (in case it does it again the word is "m o r o n") into an expletive #%&*$@ whatever...) would actually use HUN as his proxy for a devastating Black Swan event? ANSWER: the only possibility in existence is sl1ck. OOOPssss... JK. He doesn't have the shinola to make that trade.
To answer your question further, buying the put might provide some measure of insurance, too, of course. Which is why it's kinda funny that it makes sense that an uber-long would write and buy the put (using another account) because the only real cost is the transaction fee. If the stock goes DOWN appreciably, the holder can then SELL his put option to somebody else and make money.
Bottom line, as an uber-long, this is a way to grab extra value out of your position while waiting for the terminal event. Which in HUN's case is a sale of the company at "north of $25...."
If you had followed the election bet saga, you'd know that I did, in fact, vote for Romney. However, my bet position was based on demographics, GOP gaffs and blunders, and of course Romney's lack of charisma and personal connection with voters. It was really an easy call.
Bottom line, never underestimate the will of the "have-nots" to pick the pockets of the "haves"!!