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Strategies & Market Trends : Zeev's Turnips - No Politics
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To: mishedlo who wrote (4673)11/11/2001 3:11:11 AM
From: FR1  Read Replies (2) of 99280
 
I am not sure I understand this. Just because there are a lot of calls at a certain level does not mean it will not rise above that level.

Tons of calls at 55:

Let's say I am a fund manager and I bought the tons of calls at 55. I have a lot of purchasing power and was going to buy some QCOM anyway, so I buy lots of the stock to help it rise above 55 where I collect even more on the calls.

On the other hand, I may be a fund manager and sell calls at 55. I don't want the stock to raise so I sell QCOM shares to keep the value down.

It could go either way and the volume of calls does not say much of anything.

However, if you are interested in buying calls, the volume of calls at a certain strike is a good indicator of where the buyers think fair value is. Dreyfus does a good job of listing this.
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