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market maker, during 1986 Mr. Gordon had the opportunity to stand
at a post on the AMEX trading floor, where buyers and sellers in
a particular option are concentrated and where trades occur by
open outcry, and to participate in public orders that came into
that post. For example, as an options market maker, during 1986
Mr. Gordon may have been obligated to provide a bid price for an
option on a particular stock, and traders on the floor of the
AMEX could go to him either to buy or sell options at that bid
price.
As an options market maker, during 1986 Mr. Gordon purchased
a particular option at a certain bid price, owned that option for
his own account, and expected to sell it at a slightly higher
offered price. As such, Mr. Gordon took a position, that is,
held an option, with a profit expectation derived from the
fluctuations in the market. A great deal of Mr. Gordon's trading
activity as an options market maker during 1986 was in options on
the stock index, XMI. XMI is a stock index gauging the top 20
capitalized stocks on the NYSE.
During 1986, Mr. Gordon bought and sold over 50,000 option
contracts in the normal course of his trade or business as an
options market maker, and he did not identify any of those trades
in options as a hedging transaction. All of the options that Mr.
Gordon traded during that year were marked to market contracts.
During 1986, Mr. Gordon was not a specialist on the NYSE who made
a market in the stocks underlying the options that he traded.
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