The following is the OptionBT
"Out of Sight Out of Mind".
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"Out of Sight Out of Mind"
Position taken   :
Position Description   :
Four Months out,
50 point vertical bull put spread for credit,
the short side was out of the money by 267 points.
December 2000 / Settlement = 1318.25
Credit or (Debit)   :
Comments   :   "Out of Sight Out of Mind"
This BigFoot's idea is to just stay just far enough out of the way
so that the train doesn't run over him this time.
At first blush this BigFoot appears plain enough but it isn't.
"OSOM" is aware that he is near the top of the market.
He needs to know this because he wants to establish a position that
someone else will buy. As we know now the August of 2000 SPX close of 1497.25 was the
all time high for a monthly close for the SPX. The SPX began a decline after
August 2000 which would last several years reaching a low of 840.98 for the February
The brilliance of "OSOM" is that he guesses exactly right how far down the market
will go before his position is overrun given his short time period (4 months).
Because he is short the 00Dec1250 puts
he does not want the market to drop below 1250. He was right by 50 points. The market
did drop 200 points from the date the position was taken but did not drop enough to
cause a problem for his short puts. In the end the results were excellent.
On settlement day, for his four months of effort and $8.5M of margin at risk,
"Out of Sight Out of Mind" kept his $255K initial premium.
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