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To: LLCF who wrote (165209)5/11/2002 10:44:43 AM
From: mishedlo  Read Replies (1) of 436258
 
5000 options is indeed huge in some tiny stocks.
I agree, but big money is not made or lost on 5K options.

I do take that into consideration but not sure how much weight to give it, and there are other problems, explained below.

If they can make 200K worth of QQQ options go poof, I am not sure they care too much about 5K here or there on some small issues.

Still the greedy pigs like to take every dime they can steal, but I have found that 5K is harder to predict. One problem I have with smaller numbers is that if the options are shorted (covered calls by J6P, or by some hedge fund to a larger entity, selling naked puts for example), the the big fish wins and the little fish gets eaten. Yes there is always a buyer and a seller but the problem is who is the buyer and who is the seller, and that is usually impossible to know.

If J6P sold covererd calls to some institution or option pits then that instititution (owning the option as opposed to selling it) might drive up the price for the sole purpose of calling the shares away. In the case of naked puts, the opposite is likely to happen.

When you see 200K options or 100K options it is a reasonable assumption that most of those options are some long options sold to J6P or professional traders as a hedge.
Max pain in that situation is more reliable.

Those are two more reasons why Max Pain workes better on the key, heavily optioned, issues.

M
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