Market Makers Hedge Risk ``There could be significant volatility...

Market Makers Hedge Risk

``There could be significant volatility as market makers who are short the options try to hedge that risk,'' said Nations, president of Fortress Trading, a Chicago-based firm that trades options and futures. ``If you're short puts as the market goes down, you have to sell more of the underlying, and if it goes up, you have to buy more back.''

The market already proved volatile yesterday. The S&P 500 jumped 9 percent from its low to its high, the ninth consecutive session that the trough and peak were more than 5 percent apart. The average difference this year is 2.2 percent, compared with 1.2 percent in 2007 and 0.8 percent in 2006.