I think you are are dead on. Your point leads to the interesting question of whether the nature of the oversold bottoms we are used to will evolve- certainly there will still be panic selling by longs, but fewer momentum chasing, bullet wielding shorts (again assuming there are enough to matter) will be adding fuel.
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No more bullets per sec
- Thread starter Turlo
- Start date
I think you are are dead on. Your point leads to the interesting question of whether the nature of the oversold bottoms we are used to will evolve- certainly there will still be panic selling by longs, but fewer momentum chasing, bullet wielding shorts (again assuming there are enough to matter) will be adding fuel.
Quote from btommy:
.....a NYSE seat instantly sold higher on 11/18 .......
...^amazing clarity of observation^ I had an interesting call to one of the major firms in NYC today and the comments on this particular event were amazing.......I believe it was more than just coincidence...of course I could be paranoid or just plain wrong...my .02 cents...
rttrader1 -
Quote from ArchAngel:
I might have missed it, but it seems like you could still use standard exchange traded options to build a hedged position for multiday use though.
...
Did anyone else read it that way?
That's the way I'm leaning, too. Specifically, I found the following paragraph of interest, immediately following the description of the "bad" kind of married puts:
These married puts are distinguishable from other paired positions of stock and options where each component is intended to offset the risk of the other. In those cases, both sides of the position are held for a period of time, and the stock and options are priced at market levels.20
It seems that they are trying to draw the distinction here between conversions and bullets, seeming to say that the conversions are OK, but they don't come out and say that (in the typical SEC style). OTOH, why would they bother making the distinction then?
I don't understand, though, why endnote 20 is cited for that paragraph, since it seems to refer to married puts, not "other paired positions of stock and options".
Then there's endnote 21, which again does not seem to directly refer to the paragraph where it is cited, but attempts to specifically address conversions:
A variation on the married put transaction used to facilitate day trading strategies that also may [emphasis mine] be problematic is a "conversion" arrangement. In this arrangement, the trader that purchases the married put is long the stock, long a put option, and short a call option. The facilitator has the opposite side of the transaction,
...
As with married put transactions, where these arrangements, or other similar arrangements, have the characteristics described above, they do not give rise to security ownership under Rule 3b-3.
Why did they use the word "may" here? It would seem that, if you purchased the stock and the put and sold the call in the open market, instead of buying them from a "facilitator" in a single transaction, it would not have "the characteristics described above", and would still be legal. Is this what they are trying to say - that they have a problem with the use of a "facilitator" that makes it all seemless?
So, my point here is that it may still be possible to establish longer-term traditional conversions that are used to trade the same stock over a period of time.
Of course, I'm not a lawyer, but I thought these things were supposed to be written by them. The imprecision with which it's written, though, makes me wonder whether they were just asleep (as usual), or being purposely vague.
Could someone ask their compliance officer to get (yet another) clarification on this subject from the SEC, now that the issue has (unfortunately) been brought to light?
I might have missed it, but it seems like you could still use standard exchange traded options to build a hedged position for multiday use though.
...
Did anyone else read it that way?
That's the way I'm leaning, too. Specifically, I found the following paragraph of interest, immediately following the description of the "bad" kind of married puts:
These married puts are distinguishable from other paired positions of stock and options where each component is intended to offset the risk of the other. In those cases, both sides of the position are held for a period of time, and the stock and options are priced at market levels.20
It seems that they are trying to draw the distinction here between conversions and bullets, seeming to say that the conversions are OK, but they don't come out and say that (in the typical SEC style). OTOH, why would they bother making the distinction then?
I don't understand, though, why endnote 20 is cited for that paragraph, since it seems to refer to married puts, not "other paired positions of stock and options".
Then there's endnote 21, which again does not seem to directly refer to the paragraph where it is cited, but attempts to specifically address conversions:
A variation on the married put transaction used to facilitate day trading strategies that also may [emphasis mine] be problematic is a "conversion" arrangement. In this arrangement, the trader that purchases the married put is long the stock, long a put option, and short a call option. The facilitator has the opposite side of the transaction,
...
As with married put transactions, where these arrangements, or other similar arrangements, have the characteristics described above, they do not give rise to security ownership under Rule 3b-3.
Why did they use the word "may" here? It would seem that, if you purchased the stock and the put and sold the call in the open market, instead of buying them from a "facilitator" in a single transaction, it would not have "the characteristics described above", and would still be legal. Is this what they are trying to say - that they have a problem with the use of a "facilitator" that makes it all seemless?
So, my point here is that it may still be possible to establish longer-term traditional conversions that are used to trade the same stock over a period of time.
Of course, I'm not a lawyer, but I thought these things were supposed to be written by them. The imprecision with which it's written, though, makes me wonder whether they were just asleep (as usual), or being purposely vague.
Could someone ask their compliance officer to get (yet another) clarification on this subject from the SEC, now that the issue has (unfortunately) been brought to light?
Quote from I Missed Boat:
yup, I'm glad you guys also recognize this for what it is.
please, if the markets going down, its not goign to be b/c traders are hitting bids... i am sure the biggest thing on greenspan and bush's econimic agenda revolve around what us traders are doing.... the market is much bigger than us
Quote from truncheon:
stop bitching about it on a message board and write your representative and senators. we can sit back and enjoy things like the uptick rule, decimals, "pattern day trading," and now no married puts, or do something about it and make yourself heard. the majority of these guys don't know that this crap from the SEC does nothing to help the individual investor, and rely on public feedback to make their moves.
http://www.house.gov/house/MemberWWW.html
http://www.senate.gov/
I agree with 100% people should stop bitching. To this day i still cannot believe the PDT rule is still intact. Someone should suit the SEc for such rule. Its unfair to everyone.
Quote from Ron In-a-sauna:
please, if the markets going down, its not goign to be b/c traders are hitting bids... i am sure the biggest thing on greenspan and bush's econimic agenda revolve around what us traders are doing.... the market is much bigger than us
I agree completely. Fundamentals and Institutions drive the stocks, not daytraders. However, I think that the people behind this had political motives whereby they THINK that this will help keep the market up. However, if daytraders can only buy, it might just keep the market a little higher for just a little longer. Any rules that make it tougher to short always seems to have this effect.