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Tellabs, AŞ Message Board

  • mgm2020 mgm2020 Dec 5, 2012 5:23 PM Flag

    Options are a hedge. That trader has a long position in TLAB...

    He's protecting the value of his long position by buying the puts. If TLAB goes up, the puts expire at a small loss and he gives up his option to buy the shares. If TLAB falls, then his options go up in value and he can hold on to them or sell them at a profit. My guess is that he took a very large position when the dividend was announced and he is just hedging his bet. He doesn't want the stock to drop. He'd rather let his puts expire and take a very large profit and dividend payment from the stock.

    Sentiment: Strong Buy

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