The following is the OptionBT sighting of
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Position Description  :
Position taken   :
A little less than Eight Months out,
Vertical Bear Spread using Call Options for Credit,
Long the 05 Dec 1350 Calls (1100 cnt) and Short the 05 Dec 1300 Calls (1100 cnt),
Margin is required,
Short calls out of the money by 148 points (Close April 22,2005 was 1152.12).
December 15,2005 / Settlement = 1274.84
Credit or (Debit)   :
$5,000 per pair, times 1100 pair => $5,500,000
All options expired worthless NET= +$550,000
Comments   :   "Front Money"
"Front Money" has a very simple approach to fading the market from the high
Up to this point in the year the market had been fretting over several things
not the least of which is the high cost of energy. "FM" figures all these problems cannot
possibly be solved by December '05 (which is eight months away)
and the 13 percent increase the SPX would need in order to
overrun his short side is probably unlikely.
I tend to agree that this is the right call at the time , but we as we
shall see "FM" almost fine tuned it too much.
"FM" had the right frequency dialed ok, but just barely. The SPX settled at 1274.84.
While dangerously close this is still below his short strike of 1300 for the 05Dec1300 calls.
After it was over
"Front Money" had put his $5.5M at risk, got to keep the $550k for 8 months,
and in the end didn't have to give it back.
Congratulations on a timely and well tuned call.
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