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AC Investor Blog

This hedging of an option seller’s risk is called delta hedging. Nearly every market maker is looking for a synthetic arbitrage trade – a trade that can be combined with other trades to produce a profit with very low risk. The risk of simply taking directional bets, or taking on any one kind of exposure for that matter, is just too great; those who do don’t survive over the long run. Basically, to protect sold call options market makers who sold them buy shares when the underlying’s SP rises closer to the strike price, because they will have to sell 100 shares per option to the option buyer if the SP goes over the strike price. TSLA run-ups, but nonetheless I believe TSLA has built up an enormous investor base that’s going to be quite price inelastic, and is not going to sell (much) until TSLA is valued at hundreds of billions of dollars.

 

12), a $7 the boutique , is going to be worth much less than 2.1M options on TSLA, a $500 stock. Prepare strategy about stock, company etc. You should already decide whether you want to take equity, FD, preference shares or any other stock. They looked at their data and realized no large company ever has stock that goes up 4X in less than a year. 3. The companies with a large SP on this list all have much higher market caps than TSLA. 28) have large options markets and a fairly high SP, but their market caps are 5-10x TSLA’s. Few, market makers if any, simply buy calls or sell puts when they are bullish and buy puts or sell calls when they are bearish. All market makers attempt to control the risks of their positions, most of them by spreading options against other options or the underlying stock or index futures. In June when the stock price was $180 Fred (being a very astute Tesla fan) realized, it was fundamentally very underpriced. A $39-per-share offer was made when the share price was hovering around the $35 level. When SP drops and closes in on a sold option’s strike price, the market maker that sold them will sell shares (short) to hedge risk, because it will have to buy 100 shares per option at the strike price from the option buyer.