About $40 for 2,000 shares....
Don
Bullets
- Thread starter sK
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About $40 for 2,000 shares....
Don
Snosur4,
Like i was saying fear and greed.
It is the fear that people experience when a stock goes into an apparent free fall that actually exacerbates the fall. Greed is what motivated the 'robber barrons' to use their enormous power (capital and influence), to create temporary runs on stocks to shake out weak hands (now referred to as dumb money).
Fear being the stronger emotion made it easy for manipulators to take stock away from unsuspecting amateurs and even a lot of pros. All that is necessary is to "paint" the tape lower and people will start selling and the shorts will start hammering it.
When you think about it today though who is really protected by this arcane rule? Stock that is sold short has to be repurchased and if a company is not insanely overvalued the price will return from any short-term drop to find its true level. All the uptick rule does is stop short term speculators like us from capitalizing on rapid down moves. Let's face it, if your long term goal is to be short it's not like a stock never shows an uptick.
The uptick rule is antiquated and should be eliminated. It may have served a purpose in days gone by, and it may even limit some intraday volatility today, but it does nothing for the efficiency of the equities markets.
Like i was saying fear and greed.
It is the fear that people experience when a stock goes into an apparent free fall that actually exacerbates the fall. Greed is what motivated the 'robber barrons' to use their enormous power (capital and influence), to create temporary runs on stocks to shake out weak hands (now referred to as dumb money).
Fear being the stronger emotion made it easy for manipulators to take stock away from unsuspecting amateurs and even a lot of pros. All that is necessary is to "paint" the tape lower and people will start selling and the shorts will start hammering it.
When you think about it today though who is really protected by this arcane rule? Stock that is sold short has to be repurchased and if a company is not insanely overvalued the price will return from any short-term drop to find its true level. All the uptick rule does is stop short term speculators like us from capitalizing on rapid down moves. Let's face it, if your long term goal is to be short it's not like a stock never shows an uptick.
The uptick rule is antiquated and should be eliminated. It may have served a purpose in days gone by, and it may even limit some intraday volatility today, but it does nothing for the efficiency of the equities markets.
Those are some interesting points. The uptick rule will slowly start to be phased out, beginning with the big caps. It will be interesting to see what will happen with smaller caps. Maybe since the PDT rule has been so effective in limiting the number of day trades, an alternative might be to limit the number of shares an individual can short on a downtick, or zero (-) tick. Who knows...
Since we have access to bullets and conversions, it gives us a big edge...maybe we don't want them to eliminate the uptick rule....???
don
don
Your guess is as good as mine. They (SEC mob) have been doing whatever they do while talking about it. Last I heard they were going to try it for MSFT, CSCO, and other mega caps, but I don't know if they've set a date (not that setting a date has anything to do with when it may actually begin).
Back to bullets - so the main reason you sell a deep ITM call (along with buying the put) is to offset the put premium and rescue capital from being tied up in the put cost?
Would this be considered a 100sh bullet, or a 200sh bullet? (In other words, how many shares would a typical trader normally short sans uptick with the above option position).
I'd think the put + call + 200sh long stock would be good for a 100sh bullet, since selling all 200sh would leave you with the margin requirement for the naked call.
Can someone verify all of this for me? Until IB changed their PDT policy so that option value doesn't count in net liq, I had been using bullets without the naked call, but now I see how it is quite useful.
OK. Here's the very brief explanation from someone whose been using them for years.
A "bullet," or "married put" (so named because you use it to shoot down the price of a stock) is nothing more than a legal way around the uptick rule. In the words of my securities lawyer, it's "a fiction," and "an economic toll booth."
Forget about calculating. I pick up the phone, dial an 800 number,
and tell the other Broker/Dealer how many shares I want covered by my bullet and the stock name. He says, "You're up."
Then, I "hit the bid."
I pay 1.5 cents/ share for this privilege. The put is automatically exercised at 4:15 pm EST. So, let's say I used the stock I got in the bullet to sell a downtick and I did not buy the stock back at day-end. Before the put is exercised, I am flat (I got stock from the broker and sold it). After the put is exercised I am short.
Under OCC rules (incorporated in the bullet contract), "the exercise of an option contract is without regard to the uptick rule."
There is at least one firm allowing retail customers to use bullets.
I would guess at least 60% of my income comes from using bullets in various hedging strategies.
A "bullet," or "married put" (so named because you use it to shoot down the price of a stock) is nothing more than a legal way around the uptick rule. In the words of my securities lawyer, it's "a fiction," and "an economic toll booth."
Forget about calculating. I pick up the phone, dial an 800 number,
and tell the other Broker/Dealer how many shares I want covered by my bullet and the stock name. He says, "You're up."
Then, I "hit the bid."
I pay 1.5 cents/ share for this privilege. The put is automatically exercised at 4:15 pm EST. So, let's say I used the stock I got in the bullet to sell a downtick and I did not buy the stock back at day-end. Before the put is exercised, I am flat (I got stock from the broker and sold it). After the put is exercised I am short.
Under OCC rules (incorporated in the bullet contract), "the exercise of an option contract is without regard to the uptick rule."
There is at least one firm allowing retail customers to use bullets.
I would guess at least 60% of my income comes from using bullets in various hedging strategies.
