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To: Glenn D. Rudolph who wrote (16784)3/26/1997 10:39:00 PM
From: David Rosenberg   of 18024
 
Glenn, here we go again <G>

How come when I purchased March NWC 230 calls the open interest
became 10? I bought 10. There was no open interest prior to that.

Hmm... let's see if this definition were applied:

Change in OPEN INTEREST from a transaction =
(Number of opens in the transaction minus number of closes in the transaction)divided by 2

since you are postulating that there was no open interest prior to your arrival

you the purchaser must be "opening" since you had no prior position .... so that's 10
the seller most likely is also "opening" ... so that's another 10

OPEN INTEREST equals
[Number of opens(10+10) minus number of closes(0) ]divided by 2
=20/2= 10 the open interest is now 10

what I am still not certain about is possibility that the numbers can be "cooked" later on or manipulated as follows:

suppose seller S now turns around and buys 10 contracts of NWC from another person P who is fresh on the scene and selling...

that person P must be opening
but S can keep it on the books in two different ways:

(i) he can buy to open
then there are
(10 opens + 10 opens) /2 = 10 added to the previous
giving a total of 20 open interest

(ii) he can buy to close
then there are
(10 opens - 10 closes)/2= 0 added to the previous
so it stays at 10 open interest

So depending on S's bookkeeping the open interest can be manipulated

Does anyone know if this is true?
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