The following is the OptionBT sighting of    "How High is Up".
Go to Description Section
Title   :   "How High is Up"      Position taken   :     November 07,2000
Position Description   :
19 Months before Jun 02 calls expire,
Vertical Bear Call Spread for "credit",
Short side out of money by 370 points.
Expiration/Settlement    :    Settlement June 21,2002 ,
                                           position was actually closed May 30,2001.
Count   :                           200 pairs
Credit or (Debit)   :            $482,500
Margin   :                          $2,000,000
Results   :                          + $442,500

Comments   :
  "How High is Up" refers to the fact that in early November 2000 this BigFoot felt the market was high already and that others were just too optimistic about the future. He was able to find someone to take the other side of this transaction who obviously felt differently. In truth the market was in decline having reached its highest high in August 2000.

To tie up $2M in margin for nineteen months won't win many votes around the old conference table unless there is some forth coming gigantic payoff. After some effort I was able to locate the outbound closing transaction (which occured on March 30,2001) which explains why "HHisUp" is such a sensational example.

By March 30,2001 the price of the deep out of the money calls had collapsed and "HHisUp" bought back the short side calls and let the long calls expire worthless. He had to pay $2 to cover what he had previously sold for $63 1/8 just four months before.

His order "to close", which covered the shorts and released his margin ($2M), cost a measley $40,000. "HHisUp" was able to pocket the rest of the original credit ($442,500).

This is about 22% return on his $2M margin for the four months. A BigFoot Hall of Fame member for sure. If he had let his position go full term then the $40,000 which he would have saved by not closing the position would only have given his $2M margin an additional 2% return over the next 15 months.

The point must be made that "opportunities created by excesses in premiums for out of the money options don't continue forever". A year later (on Nov 07,2001 with a close of 1115.80) the best you could get for a 370 point out of the money and nineteen months down the road 03Jun1500 call was 16.80 Bid and 18.30 Ask. The easy pickin's were gone.

Our well-experienced and well-financed "How High is Up" found himself a well-disposed position well above a declining market. Four months later, he quietly and humbly moved to cash-in his winnings.

It was about as well as he could have done.


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