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  • ferretmoney ferretmoney Feb 14, 2006 10:16 PM Flag

    deep in the money put options volume

    Nope. The hefty volume in those 400's puts was not closing of positions since the open interest was dwarfed by this volume. It was either new contracts or round-trip trading, and the truth will not be know until tomorrow morning, when the change in oi can be seen. Now the real questions are, to the extent that there is much greater oi in these puts after today's close, who wrote and who bought? If there were mm's involved in these trades then they had to balance their book. If mm's were net sellers of puts then they had to sell shares to hedge and if net buyers of puts they had to buy shares to hedge. The volume of shares required to be sold or bought if the mm took one side of these massive trades is way too great for this to have been what occurred. Therefore I surmise that these were delta-balanced put spreads where the mm did not have to hedge a significant risk in order to book the trades. Now why would someone create a put spread so far into the money, where the delta is close to 1 on both sides? I don't get it.

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