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Pastimes : son of T/FIF

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To: Biomaven who wrote (483)	1/23/2000 10:57:00 PM
From: LLCF	Read Replies (1) of 673

< how a large call purchase would effect the stock price.> MM's receive special margin treatment, so they are able to sell options and buy stock without the 'cash needs' we would have for the same trade [ie. being able to pay for 50% of the price of the stock]. The MM's will simply buy stock to offest the delta's sold to any buyers. I don't know what the underlying volume in the stock has been, but buying 1000 of the 25 calls for example would probably create a buyer of a measly 50K shares. Ofen on the floor when I would see buying like this that seemed strange [why are these people buying??] I would 'overhedge' thinking that they know something... so you may get them to buy say 70K. Another problem you'll run into is that after the first 50 or so they will move the options up even if the stock hasn't moved. No one in their right mind is going to sit and sell calls endlessly at the same price in this sector. On the positive side, the trend is your friend, if the stock picks up a buyer or sellers step back while you're buying options you'll make a fortune! DAK

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