vegas.... a trade like this is used for purpose of leverage.....think about it....you can control a million shares and generate a positive cash balance....but you still need to have a large marginable portfolio to back up the margin requirements of being a put seller ..which are substantial....its definitely a hedge fund type trade....if you're the dealer your main thing is the financing rates along with the time decay and the underlying volatility...and thats all baked into the spread between the current price of the stock ...and what was paid synthetically .my guess is the dealer is now clear or fully hedged.....most likely he had a working order....as it was done in pieces and at different strikes.... the risk now lies with the put seller...because he is long the stock...fancy shooting....thanks for pointing it out to the crowd
Vegas, Just cause the call options are out of the money doesn’t mean their worthless. What happens if you bought the $85 call options and on the day of expiration the stock is at $84. What keeps you from exercising them just before closing on expiration forcing the guy who is short to deliver the million shares. Actually, the calls are your guarantee that he delivers those shares. Don’t know that he would be required to deliver the puts shares even though they are below the strike price and supposedly worth something something to the short position. How does he come up with 2 million shares by settlement day?
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