Advanced Micro Devices - Moderated (AMD) Message Board

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Technology Stocks : Advanced Micro Devices - Moderated (AMD)

AMD 208.04

+0.2%

2:58 PM EST

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From: aleph0	1/18/2006 3:24:11 PM
	Read Replies (2) of 275872

Back to Jan 2000 prior to OptionsExpirey, I found this post interesting : Re: had to sell for tax purposes at $31. by: optimist4737 12/31/05 01:40 am Msg: 1291697 of 1304836 last time they had great earnings in Jan. was I think Jan. 2000 the stock was trading around 39-40 and gapped up to 44 on open and traded up to 45 in the ensuing 30 minutes after the open. Then Morgan started locking in their long call position by selling both the stock and call position. This caused a snowball effect and before we knew it the stock was down on the day and proceeded to trade all the way back to 34 by expiration. Everyone heading out the door at the same time on good news. But after expiration the stock regained its footing and got back to 40 area within 2 weeks and then it was off to the races all the way to 96 by June 2000. So the moral is that even with great news the stock can exhibit profit taking and the major Jan option cycle expiration can cause a temporary need to lock profits of the soon to expire options causing Marketmakers in the stock options to hedge the call option dumping by selling stock as a hedge generally 1:1 ie buy 100 deep calls sell 10000 shares short exempt. This is why also short interest can be mis-interpreted. It is not a naked short but one covered by long calls most of the time. I believe at least 50% of the existing short interest is in fact covered in this way. After the efect of the jan cycle is passed 1-2 weks the stock regained its strength as noew player emerged and new call option on the buy side emerged. ie call buyers force MM to buy stock to hedge call sales to customers. This is what happened last time..but beware this is just a general guideline to what may happen. JMHO former MarketMaker in AMD options for 15 yrs. finance.messages.yahoo.com Just thought it might invite some (polite) comment here!

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