" Or is it just a coincidense that so many of these stocks just seem to close an 1/8 below a major strike price?"
Hi Steve,
It has long been my thought that there is no manipulation, but natural market forces that cause stocks with heavy option open interest to close at the strike price.
Using Intel as an example last Friday, if the price was above 75 (the nearest strike price with heavy open option interest) and you owned the 75,(or below) call options, you would have a "free" short sale in that you could cover the short by calling the stock if the position ran against you.
This, of course, drives the price towards the strike ptice.
Similarly, if you owned the 75 (or above) puts and the stock was below 75, you have a "free" long position in buying the stock. This, of course, drives the price towards the strike price.
I believe this is how most stocks are pinned to strike prices on option expiration.
Best Trading, X |
