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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 659.00+1.0%Nov 21 4:00 PM EST
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To: Zeev Hed who wrote (80135)7/13/2001 2:07:53 PM
From: Ira Player  Read Replies (2) of 99985
 
Zeev,

I believe the 80% number is a very misleading "statistic".

Most people I interact with that play in the options markets have no intention of holding the option (or staying short, if the position is short) to the expiration.

When I sell a Put at the bottom of a cycle (IMHO, of course, as to the bottom), I do not (usually) plan on having the stock put to me. I will buy back the Put as expiration nears if it is still in the money and do something else.

Same with Covered Call writing or Spreads. If the written Call is in the money, I will usually buy it back (Covered Call) and roll it out to a later month. If it is a spread, I close the Spread before expiration.

When I buy Puts or Calls, I seldom actually want to put the stock to anyone and I do not want to buy the stock with the Call. It is a trading vehicle and will be closed prior to expiration.

I do not feel I am the minority in these methods. So when "80% of options expire worthless" is stated, it really means that 80% of the options that were still open at expiration were worthless. But the majority of open interest over the life of the series never made it to expiration day before they were closed.

Ira
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