Mish, I think you and Zeev may BOTH be RIGHT about June!
Preface: I just "discovered" (i.e., it was news to me)
that not all companies which have options necessarily have
options that expire in a given month. (Note: If this
little "discovery" was in fact just a mistake on my part,
please ignore the rest of this post!)
Anyhoo, I was wondering about the June PUTs conundrum, so
I printed out the list of all 100 stocks that make up QQQ
from the NASDAQ site, and played with it.
dynamic.nasdaq.com
It seems that, of the entire QQQ, only a weighted 23.48%
have options expiring in June. (see Appendix A, at
bottom of this post, for the list of companies with
options expiring in June, along with their weighted
percentages of the QQQ.)
Okay, here's my theory:
In any given month, the degree to which the "Criminals"
can manipulate the price of QQQ is limited by the weighted
percentage of QQQ components which have options expiring
that month. I'm probably making this sound much too
mathematical, and there are probably lots of other factors
as well. Let me give a couple extreme examples to
illustrate what I'm trying to say.
Scenario 1: Each and every component of the QQQ has
options expiring, and they each have exactly equal numbers
of puts and calls at each strike price, and the number and
value of options for each stock at max pain is
proportional to that stock's weighted percentage
representation in the QQQ.
In this situation, the Crims would have to manipulate each
and every stock to within inches of its own max pain
number, both so that the aggregate would equal max pain
on the QQQ, and so as to avoid having a whole lot of
options finish in the money. In other words, they
couldn't just manipulate a few of the bigger stocks to
bring QQQ to max pain, because that would mean that a lot
of options in those individual stocks would finish in the
money.
Scenario 2: Not a single QQQ component has any options
expiring whatsoever, but the QQQ does.
In this case, the Crims could do whatever they wanted.
That is, they could let most of the QQQ components run
wherever the market wished to take them, and just
manipulate a few of the larger stocks in order to bring
QQQ to max pain, without risking that their actions would
cause other options to finish in the money.
Here's my point.
It seems to me that the situation in June is much closer
to my Scenario 2 than it is to Scenario 1.
Criminal Methodology
All the crims would have to do is take $$$ out of small
caps and stuff enough of it into a carefully selected
hand full of the large-cap QQQ components which do not have
any options expiring, and they can kill off all those
extra puts Mish is concerned about, while allowing the
COMPQ to tank as Zeev predicts.
Does this make sense?
If anybody'd care to comment, (or check my math), I'd be
most grateful.
(:
augieboo
Appendix A
Symbol: % of Adjusted Index:
=====================================
ALTR 1.17
ADRX 0.27
BEAS 0.41
BGEN 0.86
CTXS 0.33
CEFT 1.97
DISH 0.71
ERTS 0.84
FISV 1.04
IMNX 2.26
JDSU 0.74
KLAC 1.51
MEDI 0.94
NTAP 0.58
NVLS 0.73
NVDA 0.60
ORCL 2.61
PAYX 1.48
SPLS 0.69
SNPS 0.27
TLAB 0.22
TMPW 0.38
VRSN 0.55
WCOM 0.53
XLNX 1.79
========================
TOTAL 23.48
Appendix B
The following major QQQ components
have no options expiring in June:
MSFT 10.66%
INTC 7.08
CSCO 4.07
QCOM 3.34
AMGN 2.91
DELL 2.63
MXIM 2.5
AMAT 2.23
LLTC 1.78
BBBY 1.41
VRTS 1.41
SBUX 1.38
SEBL 1.33
USAI 1.3
CMCSK 1.28
CHIR 1.25
GENZ 1.17
SUNW 1.14
EBAY 1.08
COST 1.04
===========
That's 50.99% of the weighted average
contained in just 20 stocks. |
