The following is the OptionBT sighting of    "Ride Captain Ride".
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Title   :   "Ride Captain Ride"
Position Description  :
     Position taken   :     January 17,2007
     Two years out,
     Vertical Bear Put Spread
     Long the 09 Dec 1600 Puts (550 cnt), Short the 09 Dec 1300 Puts (550 cnt)
     No Margin required,
     Close on the day of trade January 17,2007 was 1430.62
     Expiration/Settlement    :    December 18,2009 / Settlement = ????

Count   :                     550 long put options, 550 short put options.

Credit or (Debit)   :     ($4,862,000)
Margin   :                   none required

Results   :                   Net Potential = +$11,638,000 if December 2009 Settlement below 1300.0

                                       

Comments   :   "Ride Captain Ride"

The Blues Image in late 1970 released a song titled 'Ride Captain Ride'. The Chorus :
'Ride, Captain ride upon your mystery ship,
Be amazed at the friends you have here on your trip,
Ride, Captain ride upon your mystery ship,
On your way to a world that others might have missed.'

Here in January of 2007 with the SPX heading up since the middle of 2006 there appears to be little reason for the Captain to head his ship south with this strong play of a bear put spread.

Can the current headwind continue to blow against the Captain pushing his ship another 200 more points to the plus side between now and December 2009, above 1600? This is what the guy who filled the Captain's order hopes and is counting on to give him the right to keep all the Captain's money?
Maybe the Captain has a better grasp of the future.

The other guy (the anti-Captain) has $16.5M in margin tied up for two years which seems a bit much. So perhaps this is a shorter term play for him. The Captain seeks a max net of +$11,638,000 if taken to settlement and if the SPX settles below 1300 by December 2009.

The anti-Captain is willing to take the Captain's $4M and hopes to be able to hold on to most of it. The anti_Captain wants the SPX to continue to move up in the coming months. Even if the market doesn't move much he hopes the decline in time premiums will increase his profit. He probably thinks that these options being relatively near the money will be easier to off load. However there are still two years left in them and they are very expensive.

The Captain though is taking this ship somewhere on a way to a world that most have missed.



Updates: (if position closed at current value)
March 30,2007 : SPX @ 1420.86Captain +$385,000.
June 29,2007 : SPX @ 1503.35Captain -$511,500.
September 28,2007 : SPX @ 1526.75Captain -$110,000.
December 31,2007 : SPX @ 1468,36Captain +$1,243,000.
March 31,2008 : SPX @ 1322,70Captain +$4,284,500.
June 30, 2008 : SPX @ 1280.00Captain +$4,928,000.
September 30, 2008 : SPX @ 1164.74Captain +$7,095,000.
December 22, 2008 : SPX @ 871.63Captain +$10,620,500.


By the time late fall of 2008 had arrived, with the SPX closing on October 6, 2008 below 1000 for the first time in years. The Captain looked like a genius. The anti-Captain has either laid off his beats against the Captain or is himself laid off.

The anti-Captain, who thought the Captain a fool when he intially covered this beat is not laughing anymore.


It would take a little research to turn up if the Captain will stay the course until the end of the journey or not.


As you can see from the update above the Captain will only leave a little over a million dollars on the table if he can find a way to exit in December of 2008.

This may be a good idea if the sea changes and the market advances on him. Even though he is likely to weather it since he has so much room between the 870's and the 1300's which is where things will become more interesting.

If he does decide to exit he will need a GapMan. He can sell his long 1600 puts to the GapMan and then use the proceeds to cover his short 1300 puts. The GapMan will need a little boost in the way of a little price reduction in order to make the deal (if there is no Gap, there is no GapMan) but it should be possible at the right price.

Since the Captain has taken this ship this far will he ride it out?
Not a good wager either way. It all depends on the circumstances of the Captain.









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