Altaba Inc. (formerly Yahoo) Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Altaba Inc. (formerly Yahoo)

AABA 19.63

0.0%

Nov 6 4:00 PM EST

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Rational who wrote (5423)	1/1/1998 5:59:00 AM
From: Mama Bear	Read Replies (1) of 27307

>>>April 40 Call buyers must be expecting Yahoo!'s price to exceed 40 + 30 3/4 (prm) = 70 3/4 by April 1998<<< Unless of course it was the specialist doing the buying. There are only two rational reasons I can think of to open a position in April 40 calls, both involve the ecpectation that the price will decline. The first is the share owner who wishes to hold his shares but does not wish to lose any nominal value. He sells covered April 40 calls. The other is the speculator who is writing them "naked", because he believes the price will fall. April 40 calls will fall just about dollar for dollar with the stock and therefore make a good shorting vehicle. >>>Yahoo! can still rise till April (at least the call buyers must be believing so and brokers who write calls may not care as long as there are enough buyers).<<< You do of course realize there is an option specialist who's responsibility is maintaining an orderly and liquid market in these options contracts? If I want to sell these calls he has no choice but to buy them, as long as I am willing to accept his offer. The offer of course is the bid. Why do you think there are brokers writing the calls, or are you just mixing broker up with specialist? there does not need to be a natural buyer in the picture by any means. If there is no natural buyer the specialist simply sells the common stock short, thereby locking in his profit (the spread) either way. If the stock goes up, he loses on the short of the common, but he gains on the calls he was "forced" to by. Either way he locks in the time premium (admittedly small on deep in the money) and the spread. It is the unravelling of these hedges and options arbitrage that many mistake for manipulation when expiry rolls around. Barb!

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next