The Oil Drum

162 comments on DrumBeat: February 28, 2007

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ckaupp on February 28, 2007 - 11:13pm

I know EXACTLY what they are---I've been trading them for years. I did NOT say purchasing either a PUT or a CALL has ANY effect on the share price of a stock. 6 months versus 8 years of options trading....

I was there and experienced first hand. My impression was that it was about perception control.

You have 2 of the biggest US Corporations and a huge GSE (Government Sponsered Entity) -- all 3 of them having serious financial trouble. A HUGE number of BEARISH bets looks BAD when you consider the old saying that "Where goes GM goes the US."

Since they were willing to let me open CALLS, or BULLISH bets, but not PUTS or BEARISH bets, I was left with the impression that it was all about PERCEPTION CONTROL. Lots of people really do look at such things at PUT/CALL ratios. It was not about controlling the stock price, but it most certainly was about "managing the market" and perceptions of these companies. If foreigners really knew the state of our economy, they would bail on US debt instruments and we'd be in a world of hurt.

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Darwinian on February 28, 2007 - 11:54pm

Ckaupp, I traded options for years also, I was a broker for six months.

A put is only a bearish bet for the buyer of the put. It is a bullish bet for the seller of the put. Likewise a call is a bullish bet for the buyer of the call but a bearish bet for the seller of the call.

But no one pays the slightest bit of attention of the put or call volume or the put/call ratio for any given stock. Hell, they are not even listed in the newspaper.

Since they were willing to let me open CALLS, or BULLISH bets, but not PUTS or BEARISH bets, I was left with the impression that it was all about PERCEPTION CONTROL. Lots of people really do look at such things at PUT/CALL ratios. It was not about controlling the stock price, but it most certainly was about "managing the market" and perceptions of these companies. If foreigners really knew the state of our economy, they would bail on US debt instruments and we'd be in a world of hurt.

This is absurd! Puts and calls are market neutral since either is a bet by two people, one betting the stock will go up and the other betting the stock will go down. Do you think if you tried to sell a put, a bullish bet, that your order would have been cancelled. Well, if the cancelled the buyer they would also have to cancel the seller. That just makes no sense whatsoever.

Ron Patterson