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did not execute any TDY option transactions in account AMR. The
exact amount of time spent by Mr. Resser trading for account QRF
is not known, but it appears to have been de minimis.5
The TDY transactions executed by Mr. Resser for account QRF
were known as "spreads".6 The basic strategy of a spread
transaction is utilizing one option in the spread to offset the
risk of another option in a spread. Theoretically, a spread
position reduces, to some extent, both risk and profit potential.
This reduction in the risk and profit potential of a spread may
be altered by exercise, by assignment, by offsetting a position,
or through a market event affecting the underlying stock.
TDY stock prices were volatile during 1982. On September
30, 1982, Mr. Resser entered into the following TDY box spread:
Option Long (Short) Quantity
April 65 Call 200
April 65 Put (200)
April 70 Call (200)
April 70 Put 200
5 Mr. Resser testified that a trade could take seconds to
execute.
6 A "spread" is a position consisting of both long and short
options in all puts, all calls, or a combination of puts and
calls. See Resser I for an explanation of options and option
trading. Though it was not explicit in the record, we infer that
Mr. Resser was known at the CBOE as a "spreader", that is, a
trader whose specialty was engaging in option spread
transactions.
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