ork,
No disrespect intended to 'crash' Lewis, but his scenario doesn't hold up to scrutiny. When an institutional player, or even a big money individual, wants a heavy option position, he/she calls the options desk of the brokerage house.
The brokerage house will then make the deal. The brokerage house which sold the puts (effectively long) is now short puts, so they must short the underlying stock, the QQQ in this case in order to be appropriately hedged.
In order to determine which way the bias leans, one must look at the open interest of the option vehicle, which is reflective in the p/c ratio. Whether or not a credit spread or naked option position was established, the simple fact is that the bias is towards the put side as the p/c ratio has skyrocketed. Therefore the brokerage house must sell the underlying common (QQQ) in order to hedge.
The p/c ratio, 10 and 21 DMA's of the p/c ratio have now surged. as the put positions are unwound, the brokerage house must cover their short QQQ position. That is why selling of the puts is bullish. The market now has the rocket fuel it needs to move up.
Despite the massive shorting of the QQQ needed in order to put those option positions into play, the Naz basically finished flat. That tells you the there were a lot of buyers yesterday. When those put positions get unwound, the market is going to ramp.
jmho |
