Any place that gives quotes for options usually tells you the open interest, which is the number of outstanding open contracts. As of Friday morning, there were about 22,000 puts open that were in the money. These included 14,255 Sept 40 puts and more than 7800 Sept. puts with strike prices above 40. There were also 13,653 Sept 35 puts open, by the way.
Then I looked at the volume of options traded on Friday, which were only 9% of those that were open. If you assume that all 9% were transactions closing options, then that still leaves 91% open at the end of the day. Now no one would be stupid enough to throw away 20,000 contracts with a market value of $400 or more per contract and an average value twice that high or so. That means we are talking about$16 million. Therefore I assume that virtually all of these options must have all been excercised at the end of the day.
If someone bought the option and held to expiration, and then excercised, they will have transferred stock to the option writers. Since the option writers would have hedged in anticipation of this, there should be no residual effect Monday. If someone sold the calls and refused to buy to close the option, then they now own the stock. Assuming that they didn't short the stock, they are now long. If they don't want to own it, they could sell the stock Monday, so there could be a residual down effect Monday. Since they could have bought options to close this week if they didn't want the stock, presumably they do want it, so I again expect no residual effect.
I have no comment on why these options were all still open at the end of the day, and why they were excercised. Normally most options are closed prior to expiration, so I was expecting alot more action in the Sept puts on Thursday and Friday than actually happened. I am still waiting for anyone else to shed light on why this happened.
Carl |
