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American Capital Agency Corp. Message Board

  • yourbestfriendintheworld yourbestfriendintheworld Jul 25, 2012 12:46 PM Flag

    Your WTF moment of the day: $40 options

    Someone has put some sort of play on the August 40 calls and puts. And by "sort" I mean gigundous. 10,000 contracts.

    Impossible to tell what it is, though. Straddle, short straddle, synthetic short or long.

    Impossible even to tell when the position first materialized. Best I can tell he either bought or sold the Puts on 7/13 for a premium of 5.43, and then made a buy of the calls yesterday for 0.04 each.

    Weak guess: he bought the Puts, hoping to make money on the SPO, didn't make enough and didn't close out (I mean, didn't he notice the spread and that there was nobody else in the market for that strike?). So now he's trying to recoup for cheap. But by buying an option with a delta of 0.00 he's going to have a hard time paying for the calls, let alone the Puts.

    Whatever his plan, he's put at least $5.47 million on the line, may have taken nearly $30 million in risk (if those Puts are short not long), and is now making very poor choices.

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