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: Saif Saifee who wrote (8260)	8/9/1997 6:06:00 PM
From: vegetarian	of 61433

>>There are scores of individual investors, Institution etc. writes covered or uncovered options for extra income. Market makers should be very low or insignificant percent of total interest. It may be possible to sway stock price on expiration day within a fraction in high volume stock or even a point ot two on thinly traded stock. Howvwer no market maker could manuplate price of stock week or two ahead of expiration.<< I have stated the popular conjecture which I am willling to accept as wrong. So why do the prices move toward a strike price that tend to make most options expire worthless? Since it benefits writers of the option (whoever they are) they should have some part in this scenario and it is conceivable that they are buying/selling underlying stock on which the option is written to move the price to a desired level. I am not sure that individual investor's buying/selling of stock would be a significant part so the stock value is probably moving because of concentrated effort by large investors which include institutions. It is hard to imagine that market makers do not form or form an insignificant part of the process but it may be possible. Since option writing and relying on the fact that most options will expire worthless to make a profit every month is risky (unless they are disposing the stock for a profit when exercised) business I am not sure if institutions work with that kind of risk. You say "it may be possible to sway the price...", we know that it happens but the question is who does it and in what ways is it done?(the obvious way as I mentioned is by buying/selling underlying security) to which you do not provide an answer. By the way nobody has said that somebody manipulates the price 2 weeks ahead of expiration but during the expiration week it does move toward the target. Again I am willing to beleive that it is just a coincidence that all option writers buy/sell the corresponding stock to drive the price to the target and what we see is a result collective action, but this buying and selling of necessity would be concentrated in pockets who then take the blame for moving the price. I am willing to hear more conrete stats or better conjectures.

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