Traders Say Madoff's Strategy Was Unworkable - WSJ.com

Traders Say Madoff's Strategy Was Unworkable - WSJ.com:

"The other red flag easily available to investors was the shallow volume in the options Mr. Madoff claimed to use as a hedge.

About $3.25 billion of stock could have been protected by the total S&P 100 options outstanding at the end of November, according to the Chicago Board Options Exchange. Mr. Madoff was thought to have had as much as $50 billion under management.

A review of open interest in S&P 100 contracts showed that nobody owns more than 6,000 contracts at any single strike price, according to FactSet.

In a more liquid hedging market like that of S&P 500 options, there are often more than 100,000 contracts outstanding at a given strike price."