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Strategies & Market Trends : Tech Stock Options
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To: Nancy who wrote (22998)9/15/1997 1:11:00 AM
From: Heg Heg   of 58727
 
Nancy, here it is:

- minimum number of ITM contracts puts + calls

Method: for each strike add #of puts and #of calls ITM if expiry is at that strike. Look for the minimum sum.

Reason: don't know, just picked this up from some thread. Seems to be a popular method.

- minimum number of ITM contracts abs(puts - calls)

Method: for each strike subtract #of puts from #of calls ITM if expiry is at that strike and take the absolute value of this. Look for the minimum.

Reason: Carl Rohman(? spelling) recently posted on some thread an explanation how expiry could 'naturally' affect the price of the underlying stock. He claims that most option writing is done by Arbs and that the writing / covering of options results in the sale or purchase of the stock by them. If that is the case (perhaps somebody IN THE KNOW could enlighten us on this) there would be an equilibrium point (ITM puts = ITM calls) with no shares to be moved. If expiry were far off the equilibrium point a large number of shares would be moved which could push the share price towards the equilibrium. Sorry I have mislaid the post of Carl, perhaps somebody knows were to find it.

- minimum cost to optionwriters

Method: Calculate for each strike what the total cost of all ITM options to the option writers would be. (spreadsheet). Look for minimum.

Reason: The ol' MM conspiracy theory suggesting that it's the MM's who are mainly writing options and that they want to make the biggest buck for themselves at expiry. Simple really.

Clear as mud?? Would appreciate what you think about this.
And also, if anybody knows who the BIG guys in option writing are and how they operate, we would love to know!!

Hope this helps

HEG
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