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Herman Miller Inc. Message Board

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  • aeronchampagne aeronchampagne Sep 10, 2003 10:42 AM Flag

    Who is buying this stock

    Not Necessarily.

    The market maker is basically stuck taking the other end of the trade, which he normally will then hedge by buying or selling stock as appropriate.

    If a fund is hedging a 100,000 share position by buying protective puts, the market maker in the option would theoretically write the puts and then at some point short the stock to hedge a large drop in the stock.

    On the other hand if the customer is writing the puts because he thinks the stock will not drop below 22.5, then the market maker is long the puts and could buy shares to hedge the position (or do nothing since his loss is limited to the price of the put).

31.73-0.41(-1.28%)12:50 PMEST