Weird question- SPY leaps

[l2tradr]

http://cboe.com/DelayedQuote/SimpleQuote.aspx?ticker=OBM+XE-E

I don't understand how the open interest on the Dec 2011 puts (25 strike) on the SPY is so high, at more than 17,000? Every other leap is in the hundreds or zero...never seen this before, anyone care to comment or provide insight?

 

[maninjapan]

institutional hedge??

 

[ptrjon]

I bought all of them except for 27.

 

[ptrjon]

I don't know who bought the other 27 though, sorry.

 

[l2tradr]

Quote from maninjapan:

institutional hedge??

Yeah, maybe...BUT at 25? That is almost unthinkable...

 

[jeb9999]

You missed a much bigger bulge - Dec 2010 55 puts have OI of 146,994.

 

[El OchoCinco]

Could be a fund selling 17,000 deep OTM puts at a low strike for some premium. Probably looking to cash out at the end of 2009 with a hope that market moves higher plus 1 year of decay and take profits. They could probably hedge with es futures or other things along the way to reduce risk as best as they can. That is about $1.4 million in premium.

 

[KINGOFSHORTS]

Quote from jeb9999:

You missed a much bigger bulge - Dec 2010 55 puts have OI of 146,994.

WOW! Someone is going to be putting a lot of money in the put writers pocket

 

[l2tradr]

Quote from jeb9999:

You missed a much bigger bulge - Dec 2010 55 puts have OI of 146,994.

That I can see as a hedge, but the 25 strike perplexed me...who would buy that?

 

[MTE]

Quote from l2tradr:

Yeah, maybe...BUT at 25? That is almost unthinkable...

I don't see why would this be unthinkable. This is around 60,000 deltas, so it could easily be a delta hedge.