Ascend Communications (ASND) Message Board

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Technology Stocks : Ascend Communications (ASND)

ASND 220.42

+4.9%

Dec 12 9:30 AM EST

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To: Fernando Saldanha who wrote (8257)	8/9/1997 3:27:00 PM
From: vegetarian	of 61433

>>M. carter, you asked W. Bendus to prove that "the money that market makers make through TRADING during options expiration will be more than the money that they can get to keep via options premium if the options expire worthless." Can you "prove" that market makers make ANY money if options expire worthless? That is, can you prove that they are net sellers of options? Best regards.<< My observation is based on statistical correlation between the price the stocks are driven to at expiration and the optimal strike price looking at the open interest. The correlation is strong enough that one can deduce that option writers (whoever they are) would gain from driving the price toward the strike price. Also, a high % of options expire worthless (90% or more because they are used for hedging) implying that the buyers lose money, the market makers are not known to make losses to that degree so if they do anything with options, they are most likely doing it on the write side than buy side. If you read my post I said that in spite of this observation I am willing to accept that it is a mere coincidence that the prices drift to where they drift at expiration (do you have other theories on this one?) but since WBendus called others postulating this as fools I am sure he has a better proof that mms do not indulge this and are likely to make more money by trading than writing options.

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