Gary, as for your 30 puts, they have virtually no chance of expiring in the money, so I'd look for an interday low on Monday (preferably) or Tuesday. My guess is that the stock hits bottom at 10:00 AM on Monday at about 32 or 33. Remember that your options will lose time value every day at noon and every night. Also, they lost alot of value over the weekend.
Here are my thoughts on the effect of the huge number of Sept options on the action the last week or so. When the calls were initially purchased the "professional option writers" (note - they are actually separate entities from market makers, market makers are the people who make a market in the underlying stock) did in fact buy shares, but not one for one. As the stock moved down, they were able to unload the stock which they held to protect their calls. They now need very few shares to cover Sept 50 calls, for example. Thus as the stock moved down, the huge number of calls outstanding increased the volitility because it caused option writers to sell shares. Also, as the stock fell, the option writers also had to short additional shares to cover the outstanding puts, again increasing the volitility.
The "professional option writers" do still have short positions to cover the in-the-money puts. As the put option holders decide the stock has fallen far enough and begin to cash in the puts, the option writers will cover their short positions, which will add support to the stock. I personally expect the stock to hit an interday low either
Monday or Tuesday, and then rally into expiration. I believe that the stock will end the week close to 40, and I doubt if it will end under 35. Do keep in mind though that as put buyers sell the in-the-money puts the option writers will purchase about 3 million shares, which is substantial. But if the volume stays over 15 million/day, then 3 million could be a drop in the bucket (albeit a big drop), and might not be sufficient to reverse the trend.
What will happen the following week is anyone's guess, though.
Carl |
