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Politics : Formerly About Advanced Micro Devices
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To: tejek who wrote (141880)1/18/2002 3:55:04 PM
From: TimF  Read Replies (2) of 1584778
 
Ted, It seems that when Cramer says "Anyway, all of these different strategies have the effect of pushing the common stock toward the strike and then pinning it there because if it rallies too much above the strike, call sellers come in and if it sells off too far from the strike, put sellers come in." What "towards the strike" means is towards a specific one (of many available) strike price that is near the current stock price and for a date near expiration. He is also apparently talking about options that will expire soon. But in reality there is no one "the strike" price. There is still a whole bunch, and if you knew the stock would move quickly in one direction in the next few minutes you could make a killing by buying out of the money options for pennies.

The article is dated 1/17 and he is talking about Intel strike price 35 options. Intel has over 20 different strike prices for January 02 options. Since the underyling stock is priced at 33.33 the nearest to the money are 32.50 and 35. The strike price with the most open contracts (according to Yahoo) is the 35 and 32.50 is next. Intel is down over a buck today so it really doesn't seem pinned to hard to 35, but since the options expire in about 10 minutes I think it will end up between 32.50 and 35.

I think relying on the type of strategy he is trying to use would only work if you have a lot of information and experience and the money to make trades that are large enough so you don't have to worry about the comission. He speaks more from the perspective of a professional trader.

Tim
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