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Technology Stocks : Metatools (MTLS) - looking for discussion
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To: Pete Mason who wrote (250)5/21/1997 12:30:00 PM
From: earthling   of 281
 
Re: is the listing of options on the AMEX a good thing?

For long-run buy-and-hold types, it doesn't make any significant difference whether there are secondary instruments. For short-term types, I would see it as a positive thing because it allows for a broadening of the pool of potential buyers to include more of those who otherwise might not buy because of volatility. It gives these people a way to hedge, sacrificing some upside in order to limit the downside. In general, secondary instruments dampen volatility. Sounds counter-intuitive, but that's the way it is. The only exception would be the case of organized, conspiratorial manipulations by teams of speculators. But that sort of thing is illegal and has never been known to happen on the NASDAQ, si?

For the sophisticated investor, keeping track of big moves in options and shorting can provide a signal that something is going on--ones' ability to interpret such things is a good indication of how far from the epicenter of company information one is sitting. If you're constantly getting blindsided, it's a good sign that maybe this isn't a stock where you have an "information advantage."

A recent phenomenon reported in the business press has been the development of secondary markets catering to insiders who have been given options. Stockholders need to keep an eye on the exploitation of this by executives. I doubt this is relevant to a company like MTLS, but it's something to be aware of.
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