Applied Magnetics Corp Message Board

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Technology Stocks : Applied Magnetics Corp

APM 1.400

+2.6%

Nov 7 9:30 AM EST

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To: Jonathan Bird who wrote (11223)	1/14/1998 8:40:00 PM
From: Greg Jung	Read Replies (3) of 12298

"supporting a 12.5 price" There are a lot of put options bought for 12.5 strike. The theory of "maximum pain" for option speculators, the stocks tend to close nearest the strike of least "payout". Usually there isn't a speculator on the other end but an arbitageur with a balancing position: to sell the put, he shorted the stock. So when people cash in the 15 puts, for instance, the short comes off and stock is purchased. Not important for small open interests, but some stocks carry a big relative open interest (For APM it is huge). I've seen when it works the other way - lots of calls - that the stock in a down market maintains a price and the following week takes a nosedive. Greg

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