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Exchange rules mandated by the SEC that restrict the size of option positions that can be taken by a single investor or a group of investors acting in concert. Generally, CFTC-regulated financial futures options have no meaningful position restrictions. These ill-considered regulations have forced portfolio insurers to undertake dynamic hedging of stock positions in the stock or stock index futures markets rather than in the option markets. The contribution of position limits to the impact of portfolio insurance trades on the stock market was largely responsible for the magnitude of the October 1987 stock market break.
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