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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe
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To: LLCF who wrote (1061)10/21/2004 7:16:33 PM
From: Ira Player  Read Replies (1) of 1064
 
You cannot tell by open interest what happened.

Example:

Open interest 100, 20 contracts traded, next day open interest is 108.

Could be 12 existing contracts sold, 8 new ones written, 0 exercised.
Could be 10 existing contracts sold, 10 new ones written, 2 exercised.
Could be 0 existing contracts sold, 20 new ones written, 12 exercised.

There is no way to derive exercised contracts by change in open interest.

Ira

PS: I'm interested because I often sell DITM Puts when I'm bullish and (especially when interest rates are higher) DITM Puts are often exercised by the MM's rather than holding them. Knowing this helps prepare for/avoid additional transaction costs.
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