The following is the OptionBT sighting of
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Position Description   :
Position taken   :
December 18, 2003 and December 29,2003
Six Months out,
Two long positions taken on the 18th and sold on the 29th,
No Margin required,
Jun 18,2004 / Settlement = 1129.60
20,750 ... buy... 04Jun825 calls (bought on the 18th).
20,250 ... buy... 04Jun850 calls (bought on the 18th).
19,900 ... sell .. 04Jun825 calls (sold on the 29th).
20,000 ... sell .. 04Jun850 calls (sold on the 29th).
net = 850 long 04Jun825 calls (open).
net = 250 long 04Jun850 calls (open).
Credit or (Debit)   :
Initial Debit ($1,012,677,500) as of the 18th of December 2003.
Net Credit as of 29th of December 2003 : $16,417,500 + $32,125,000 = $48,542,500
No Margin Required.
Results   : +$48.5M ..Plus.. For the open 1100 cnt of long Calls:
Net = for the 04Jun825 Calls, +$85,000 per point of SPX above 825 by 04 June SPX settlement.
Net = for the 04Jun850 Calls, +$25,000 per point of SPX above 850 by 04 June SPX settlement.
With the SPX June Settlement at 1129.6,
the 850 04Jun825 Calls were worth $25,891,000 and
the 250 04Jun850 Calls were worth $6,990,000 for a total of +$32,881,000.
Comments   :   "Blues Brothers"
The "Blues Brothers" are a classy bunch. There is nothing very spectacular here except for
the timing, the size, the leave, and the net. The "BBs" are aware that the market for these
few days is going up and they are going to take FULL advantage. The only risk is the holding
of the long position for the days between the 18th and the 29th. This is no small position
to hold either. The total cash on hand required for the 20,750 count of the 04Jun825's
plus the 20,250 count of the 04Jun850's was $1,012,677,500 (Yes that is Billion with a 'B').
Allowing a "B" to float in the wind for 10 days requires a lot of something. That something
may well have been something akin to what the Dolphins like to do.
Let's trade the envy for admiration. You have to be excited about the net $48M take on the
sales of the calls on the 29th and the leave of
$110k per point on the SPX between now and the 18th of June 2004 on the remainder.
You might say that there could have been even more made on the position if the "BBs" were to
have held these calls into January, but this is where the IRS makes things happen.
These traders are Mark to Market. This means for tax purposes they have to liquidate
their long positions on paper at the end of the year. The taxes for the profits would be
due even though the positions were still open.
This is why the "BBs" were obliged to bail and carry over a mere
1100 count instead of the 41,000 count.
Since these long positions
were to have been counted as sold for profit anyway, it is better to do it yourself and use the
profit to pay the taxes.
Another way to look at it might be that is there is
little merit for holding deep in the money
calls over the long haul because they tie up large amounts of capital. The final reason
that I think they bailed is that when there is a "B"
on the line the Brass tends to get a bit nervous.
Might as well induct the "Blues Brothers" into the BigFoot Hall of Fame now because the $48M is
already in a safe place and all the bills are paid, but the 1100 longs (
850 of the 04Jun825 calls and 250 of the 04Jun850 calls ) are still out there
and we will watch to see how this all plays out.
Well the play out or should I say the payout was pretty nice.
The total net worth of all the open positions at settlement was $32,881,000.
Adding in the $48,542,500 they were "paid" to put on these positions, the total
net take away was $81,423,500.
It's not likely the "Blues Brothers" were very blue about the summer of 2004.
Because so many people have asked....what Dolphins like to do is "bow wave"...
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