MDA - Market Direction Analysis

[positiontrader]

Augie,

From Zeev's board

Posted by: nd11223344
In reply to: positiontrader who wrote msg# 73243 Date:2/6/2003 10:49:46 PM
Post #of 73255

A post from Sox Bear from the Prudent Bear.




"This is from Lance Lewis (yes the ex-Prudent Bear fellow) as quoted by Mark-to-Market at capitalstool.com:

"A hint of things to come may have come today when it appeared that someone was putting on what is known as a ?bullet? trade in the QQQs. A massive amount of puts were bought along with common stock today (which heavily skewed the put/call number if you look at the closing data). The strategy here is to dump the common at some point, causing the market to move lower while you hold the puts and the guys that sold you the puts are also forced to sell in order to delta hedge their positions, hitting the market with double the downside firing power. So, we'll see what happens, but my guess is that somebody is setting up an ambush on this ?support? level in the NASDAQ."

[SB note: technically this is correct. The put writer has to sell into a declining market to stay hedged which would only exacerbate the move]"