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Technology Stocks : Ascend Communications (ASND)
ASND 202.96-2.8%Jan 9 9:30 AM EST
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To: Carl R. who wrote (8274)8/10/1997 11:09:00 AM
From: vegetarian   of 61433
 
>>Thus, if the price were above 55, the effect would
be to cause the execution of 23,298 calls, which causes the market makers to sell 2.3 million shares of stock, driving the stock down.<<

Thanks for your logical explanation which I am trying to understand.
From the explanation, I gather the MMs are indeed writers of options which was a point of controversy, is that a right thing to deduce?
When in the money calls are executed because the price going up, you are saying that the market makers would sell the stock and the call option buyer will buy it (because he/she can make a profit by selling it to the market at a higher price); now the part about stock price being driven down because of the market maker selling it would hold only if the call buyer who bought the stock holds onto it; if the call buyer sells it into the market to realize an immediate profit the effect of price driven down will be counterbalanced immediately leaving one to conclude that such option exercising would not have an effect on the stock price.
I am not sure about the trading tendencies of option players who exercise their calls but would assume taht they would want to realize their profits immediately if they were to exercise their options.
Will appreciate your views. Thanks
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