The following is the OptionBT
"Ton of NE".
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"Ton of NE"
Position Description   :
Position taken   :     November 27,2002
Seven Months out,
Four part Put Backspread Combination,
(long) 03June750 Puts (times 2)
June 20,2003 / Settlement = 1001.56
2000 pairs (times 2)
Credit or (Debit)   :
$ 15 M
+ $1,060,000 (settlement SPX above 875)
"Ton of NE".
At one ton's worth (2000 count) of pairs "Ton of NE" is a large
(but well under the record) Nord Express.
These NE spreads are always logically placed and represent a well executed plan.
The number of times one of these large NE players has had to cover for a lose can be
counted on the fingers of one hand. These guys are good, but what if there were more
It is almost like a sign post in the middle of the desert which says
to all of us, "If you cross this line, then you will pay for it.".
As mentioned in another Hall of Fame entry these spreads are like quick silver.
If the index overruns them they can be
quickly disposed of for a profit as the middle (times two) puts will explode in value
and the deeper in the money short puts (deeper by 75 points) will decelerate
with approach to expiration.
These "NE" guys are pros. When they stick their spear in the ground you better believe
they have it figured out. Betting against them is probably not a very good idea. So what
was it that they are telling us? Their position tells us that by June 2003 the SPX index
would be greater than 825.
There are good reasons why the average Joe won't take these positions. It has to do with
the little matter of $15,000,000 worth of margin. Although this is a deterent for most
of us little guys, it's not for the likes of the "Ton of NE" people who see this position as a
conservative play with barbs like a porcupine for anyone that would dare to mess with them.
I have no idea how "Ton of NE" found someone to take the other side of this position,
because whoever it was, come July 20, 2003, that someone was down $1 Million.
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