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Technology Stocks : Ascend Communications (ASND)
ASND 208.30+3.4%10:48 AM EST
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To: Heg Heg who wrote (3177)5/19/1997 8:29:00 AM
From: Glenn D. Rudolph   of 61433
 
The put is deeply out of the money, so nobody would exercise it. The
only other way how the OI can drop (I believe, please correct me if i am
wrong!) is if the optionwriters buy back the puts to close out the
transaction. WHY WOULD THEY DO THIS ????

Heg,

You are correct that the option writer needs to buy back the put to close contract or the put has to be exercised to reduce OI.

Why would they do that? You got me and I do a lot of options. I could speculate forever but my only guess would be the writer or writers did not have enough equity in their account to hold the positions and had a maintenance call. The out of the money puts require 20% of the strike price less the amount out of the money to hold the position. Relatively small amount unless you sold a lot of puts.

Here is an example of what I would consider unusual nor can I explain it. I sold 20 USRX August 65 puts in February or March. I received a lot of time premium due to the volitility of USRX and the amount of time til August. This means the buyer of these puts payed a lot of extra money to have "protection" til August. Six of these puts were assigned to me in April and not on expiration day although that has nothing to do with the issue. I could speculate forever. The owners of the shares needed cash. If so, why not sell the puts they were holding. Presently USRX is at 65 so I have the shares that were assigned, could sell them at a profit now if I wished. I cannot tell you what these people were thinking or what the reasoning for the assignment was.

If you figure it out, please let me know<G>

Glenn
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