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Pastimes : GLOSSARY DICTIONARY FAQ for TECHNICAL TERMS
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To: username who wrote (42)2/22/1998 4:11:00 PM
From: Spots  Read Replies (1) of 136
 
Re: STOCK CLOSE AT THE STRIKE PRICE ON DAY OF OPTION EXPIRATION

The following discussion is a technical explanation
of what the pressures are on a stock at option expiration
by the option market makers. Since I wrote the post,
I feel competent to recommend that it be viewed with some
skepticism:

Message 2157044

Several surrounding posts in
the same thread give more insight into the mechanics of
carrying out "pushing a stock" to the option parity point.

For a thorough discussion by a "been there done that"
professional, see McMillan's
Options as a Strategic Investment in which the
subject is covered in detail, including how much effect
this phenomenon has on real world trading. In a nutshell,
sometimes the effects are significant.

I've observed them to be significant at times even on
large cap NYSE stocks. Mostly,
IMHO, it depends on what else is happening. If nothing
much, it doesn't take much of a nudge. In the face of
other news, the effect is negligible.
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