Today was a fascinating day. I am still not sure why what happened happened, and I am looking for other people's thoughts. The calls behaved as expected, and 7631 of 9716 calls in the money (or 79%) were closed out rather than exercised. But the put action was unexpected. Only 2581 of the 29,788 puts in the money were closed out, and half of them waited until the last hour to do so.
Only 9% were closed, and the rest were exercised? Maybe someone else has an idea why, but the only thing I can come up with is that the puts weren't in the hands of speculators at all, but were bought by funds or other big holders as insurance, and they were resigned to delivering their shares under the put. But this makes no sense to me. At any virtually any point along the way, whoever held the puts could have simultaneously sold the puts and the stock for more than the strike price. and gotten the money sooner. By holding to expiration, all they get is the strike price. Why would they do this?
Alternatively, maybe some big buyers wrote a huge quantity of puts as a way of buying the stock, and they were just waiting for the stock to be delivered. This makes sense, so maybe that is what happened today. If you write the put to buy the stock, there is no hurry to exercise because that way you can wait until the end to put up the cash. I guess this must be what happened. Heck I wrote some March 60 calls and I am waiting until March to fork over the cash.
So what does this bode for Monday? Not much. If people bought the stock this way, I suppose we may see a little extra selling Monday, but I don't expect much consequence from today's action.
Anybody else have any ideas?
Carl |
