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Strategies & Market Trends : Canadian Options
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To: Jan Johnstone who wrote (627)7/20/1997 10:31:00 PM
From: Dave.S   of 1599
 
TXO's actually expire on the friday morning opening along with the TXF, Toronto 35 Futures contract. The friday morning opening was chosen to make it easier for the firms to unwind their positions which were established during the contract period.

For example Nesbitt Burns may have run many "Buy" programs during the period before expire. This means that they brought baskets of stock and sold futures against them to lock in a profit. On the friday morning they will unwind this position - that is, sell the stock which was purchased and realizing the profit.

The unwinding usually doesn't cause much problem because the firms have to disclose their intentions on the Thursday at 4:30pm. This allows all the firms to prepare for the expected imbalances at the friday opening.

If expiry was at the close then it would make for a very wild finish which use to happen in New York before they made the firms disclose the imbalances. We use to get abnormal openings in Toronto at expiry before the TFE made the firms declare themselves.

I'm not sure about a sell off this week but I brought some August 360 puts on friday just to be safe. I also sold stock against some in the money calls that I have which could be quite profitable if we do move down.

I find this "Waiting for the big Kahuna" thread a real threat! I've also started looking at the "Ask Michael Burke" one as well.

Dave
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