Fred Ruffy

Tuesday's Options Recap

Typo. sorry, should be 42.72.

Tuesday's Options Recap: Risk Perceptions Fall Sharply

Thank you for the comments. Sounds like the KIE calls are working out well for you Rayman.

One clarification to the comment: "something like 80% or more of all block option trades are delta neutral".

Delta neutral implies that a position is perfectly hedged. For example, 100 shares of stock, which have a delta of 1.00, can be hedged with two puts that have negative deltas of -.5. This results in a position delta of 0 or delta neutral.

Over the 15+ years I have been active in the options market, including on an institutional trading desk, I can tell you with certainty that 80 percent of block options trades are not delta neutral. Options trades are initiated by buyers and sellers for a variety of reasons--sometimes to hedge, sometimes to speculate. True, a lot of the activity is tied to shares, but it is often on positive or negative deltas.

We monitor the activity throughout the day and write about the most interesting and noteworthy activity. Whether or not you feel it has predictive value is up to you, but consider a recent example from Friday--a surge in call activity in Schering Plough that occurred before the takeover announcement Monday. This was not a coincidence.

If you want to find out more about the tools we use and how we track the activity, we have a FAQ section on our web site that addresses many of those questions.

Good trading!

Fast Money Recap - HSBC Is Falling off a Cliff (1/12/09)

The bulk of the trading activity in HBC Monday involved a customer purchase of 75,000 March 45 puts that traded along with the purchase of 650,000 shares at $47, 12,500 March 35 puts at $1.35, 12,500 March 40 puts for $2.45, and the Sale of 50,000 March 50 puts for $4.30. All these traded at the same time by same customer. It could be some rolling of positions. The March 45 puts saw the biggest increase in open interest.