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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe
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To: Ira Player who wrote (1062)10/21/2004 8:05:11 PM
From: LLCF  Read Replies (1) of 1064
 
<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.>

FWIW, If you're 100delta puts you're just waiting to be assigned, and pissing away transaction costs AND spread.

<You cannot tell by open interest what happened.>

Oh, I thought you meant in large blocks. I fail to see knowing if 2 and 3 lots are being exercised helps you at all? You can certainly gleen some [lots!] insight watching OI since most deep in the money put don't trade much and watching OI fall by hundreds a day with little or no volume [the normal case once a deep in becomes 100delta] tells you what's happening. Once an option is deep enough in the money the pro's will always exercise them [unless cash index option and left unhedged]... you'll sell them some and be 'put' the next day. A more important thing to look at is simply OI, since a large open interest means folks aren't exercising them yet for the most part.... if you really think selling them is a good strategy vs buying the stock or index.

Also, FWIW the assignment process is random, it doesn't matter who you traded with.

DAK
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