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Strategies & Market Trends : Waiting for the big Kahuna
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To: robnhood who wrote (6575)10/17/1997 9:20:00 PM
From: Bilow   of 94695
 
Suppose it's two hours before close on option expiration day.
And the market is down 300 pts. What are you going to do?
What are the market makers going to do? It could get pretty
interesting, when the government takes away your ability to
hedge your trades on the NYSE. I guess they'd take orders,
but if they temporarily closed what is going to happen when
they open again? My understanding of options on indexes
is that if the stock doesn't open, its most recently traded
price is used to compute the index. So you wouldn't know
whether the index would make a big move until all of its
components had re-opened. That could get pretty scary,
cause orders would continue arriving during the 30/60 minutes
the market was recessed, and you can predict that a lot of
them will be at the "market". If I were a market maker for
options I would run the spreads way up and just stop anybody
from trading. I would guess the futures guys would do the
same (BWDIK).

-- Carl
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